The relevant risk of any individual security is not total variability in returns but rather systematic variability, which is that portion of total variability that cannot be eliminated by combining it with other securities in a diversified portfolio.

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Systematic variability, also known as market risk, is the risk that is inherent in the overall market or economy and cannot be diversified away. This risk affects all securities in the market and is not specific to any individual security. Therefore, it is important to consider systematic risk when evaluating the risk of a security.

The Relevant Risk of Any Individual Security Is Not Total