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What is unsystematic risk? What portfolio minimises unsystematic risk and why?

What is unsystematic risk? What portfolio minimises unsystematic risk and why?

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Unsystematic is that risk which can be diversified and are firm specific risk.Unsystematic risk is also part of total risk. Examples of Unsystematic risk: Labour strikes in a company, supply problem or machine breakdown are all unsystematic risks.

A portfolio with large number of stocks minimises unsystematic risk. Portfolio of stocks with negative correlation minimises unsystematic risk. This is because negative correlation reduces standard deviation or risk of portfolio, hence minimises unsystematic risk.

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