How to calculate systematic risk

Equity market riskscan be broadly classified as systematic and unsystematic risks. The source of systematic risk is the market or global factors such as rising oil prices, currency movements, changing government policies, and changes in inflation and interest rates.

Unsystematic risks, however, are owed to factors unique to a company or an industry. Management and labour relations, increased competition, entry of new players, and customers’ preference for a company’s products are some of the factors that generate unsystematic risk.

Unsystematic risks are also known as internal risks and are diversifiable.

Systematic and unsystematic risk formula

In other words, these risks can be mitigated by adding stocksfrom different industries. Systematic risks, however, are non-diversifiable. Diversification cannot help in bring down the market risks. It is the stocks with high internal risks that require evaluation as their internal factors/policies have a significant bearing on their fundamentals and their price performance.

So, how does one identify a stock’s systematic a

how to calculate systematic risk in excel

how to calculate risk in excel