What is idiosyncratic risk?Idiosyncratic Risk
Risk specific to one company (earnings, accidents and so on) that market instruments can't hedge; only diversification helps.
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- Hedging StrategiesHedging a Multi-Asset Portfolio
A global portfolio is exposed to US stocks, European stocks, the euro and crude oil all at once. Switch on the hedges one by one and watch total risk come apart piece by piece.
- Quant BasicsDiversification: The Magic of Correlation
The more assets you hold that don't move in perfect sync, the less your portfolio swings. But correlation sets the limit on how far diversification can go.
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