what is idiosyncratic risk 
idiosyncratic risk is a type of investment risk that is endemic to an individual asset like a particular company s stock a group of assets like a particular sector or in some cases a very specific asset class like collateralized mortgage obligations idiosyncratic risk is also referred to as a specific risk or unsystematic risk therefore the opposite of idiosyncratic risk is a systematic risk which is the overall risk that affects all assets such as fluctuations in the stock market interest rates or the entire financial system investopedia zoe hansenunderstanding idiosyncratic riskresearch suggests that idiosyncratic risk accounts for most of the variation in the uncertainty surrounding an individual stock over time rather than market risk idiosyncratic risk can be thought of as the factors that affect an asset such as the stock and its underlying company at the microeconomic level it has little or no correlation with risks that reflect larger macroeconomic forces such as market risk microeconomic factors are those that affect a limited or small portion of the entire economy and macro forces are those impacting larger segments or the entire economy company management s decisions on financial policy investment strategy and operations are all idiosyncratic risks specific to a particular company and stock other examples can include the geographical location of operations and corporate culture in terms of industry or sector an example of idiosyncratic risk for mining companies would be the exhaustion or the inaccessibility of a vein or a seam of metal likewise the possibility of a pilots or a mechanics strike would be an idiosyncratic risk for airline companies 