Portfolio risk - Financial definition
Concise definition of the term portfolio risk
Portfolio risk refers to the potential for loss or volatility associated with holding a collection of investments, arising from factors such as market fluctuations, economic events, and individual asset performance.
Comprehensive definition of the term portfolio risk
Portfolio risk encompasses the uncertainty of returns across a diversified set of investments, reflecting the combined impact of various market, economic, and asset-specific factors. It involves assessing and managing factors like market volatility, correlation between assets, concentration risk, and exposure to external events, aiming to achieve an optimal balance between risk and return.
For example, an investor may diversify their portfolio across asset classes, industries, and geographic regions to mitigate specific risks, while also employing risk management techniques such as hedging or adjusting asset allocations based on market conditions.