Unsystematic risk or residual risk

Residual risk, or unsystematic risk, also known as nonsystematic risk represents the risk that investor has to bear regardless of investment. In example, this sort of risk is best avoided by having diverse portfolio of investment, and to spread percentage of investment onto different assets. So if one fails, only a small percentage is lost, whereas if the investor has only two assets, one fails – half is lost.
This sort of risk is steady and present in every investment, and it can appear due to competition getting stronger, a change in regulations, recall of a product and a managerial change.
I.e. the risk that a sports club will become a minor and its stock prices will suffer. This risk has influence in the sport business, the team and its sponsors, but it doesn’t affect the whole league, so that can be used as an example for a nonsystematic risk.
An investor that had only stocks in ownership of the club faces nonsystematic risk of a high level, but if he invested in a factory that produces clothes, retail stock, and shares of other clubs, he would face less risk.
But, all risk can’t be fully avoided. This risk affects entire market. And even if the investor wouldn’t invest in anything – he or she risks money losing its value due to inflation.
It is impossible to always know where the risk might occur.
The RSI can be used to identify extremes, to confirm a trend and also to identify divergence. We will look at each of these principles in detail.