What is the difference between idiosyncratic and systematic risk?

Interview Question: What is the difference between idiosyncratic and systematic risk?

Answer:

Idiosyncratic risk refers to the risk of price change of a security due to the unique circumstances of a specific security, as opposed to the overall market (systematic risk). Idiosyncratic risk can be virtually eliminated from a portfolio through diversification, while systemcatic/market risk cannot be.

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