The risk associated with a single operating unit of a company or asset.

Standalone involves the risks created by a specific division or project, which would not exist if operations in that area were to cease.
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Standalone risk measures the dangers

associated with a single facet of a company's operations or by holding a specific asset. In portfolio management, it measures the

undiversified risk of an individual asset. For a

company, standalone risk allows them to determine a project's risk as if it were operating as an independent entity.

When an investor only invests in one type of stock, then his or her entire investment returns depend on the

performance of that security. If the company that issued

the stock performs well then the stock will grow in value but if the firm becomes insolvent then the stock may become worthless. Therefore, such an investor is exposed to standalone risk because that individual's

entire investment could be lost due to the poor

performance of a single asset.

Additionally, someone who invests in a wide array of securities is also exposed to standalone risk if that

individual holds each type of instrument in a separate

brokerage account. In such situations, the investor would not lose everything if one asset dropped in value, but each holding account would expose the investor to a different standalone risk since each account would only

hold one type of security

The term portfolio refers to any collection of financial

assets such as stocks, bonds, and cash.

Portfolios may be held by individual investors and/or managed by financial professionals, hedge funds, banks and other financial institutions.

It is the chance that combination of assets or units within individual group of investments fail to meet financial objective. In theory,

portfolio risk can be eliminated by

successful diversification.

A portfolio's asset allocation may be managed utilizing any of the following investment approaches and principles:
equally-weighting capitalization-weighting price-weighting Risk parity Capital asset pricing model Arbitrage pricing theory Jensen Index Treynor Index Sharpe Diagonal (or Index) model Value at risk model Modern Portfolio Theory

Interest rate risk: Get familiar with a complicated measure called duration, which indicates the sensitivity of a bond or bond fund to a change in interest rates. The longer the duration expressed in years, as maturities are, but not the same the steeper the price decline as rates rise (and vice versa). Unfortunately, high credit quality does not protect you from a plunge in prices of long-term issues. How do you mitigate interest rate risk? Align durations with your investment horizon short-term bonds for a short-term plan; intermediate-term for longer.

Currency risk: In addition to the risks they share with domestic stock funds, world equity funds pose the risk that a rise in the U.S. dollars value against other currencies could cause returns on foreign stocks, expressed in local currencies, to suffer when translated into greenbacks. To cope with currency and regional risks, limit exposure to foreign stock markets but not to prospering global economies by owning domestic funds invested in strong U.S.-based companies that operate internationally and may hedge foreign currency exposure.

Investment style risk: Growth-stock funds are expected to own stocks that can grow faster than an economy, while value stock funds are supposed to buy stocks that sell at discounts to an estimate of their true value. These are called style funds. Owning a growth fund when value funds are hot (or vice versa) that is, being invested in an out-of-favor investment style, then rushing to an in-favor style leader, and then switching to keep up with style leadership rotation is a recipe for high trading costs and possibly investment losses.

Unsuitable investment risk: When securities markets offer low bond yields, volatile equity returns, or both, you may be tempted by investments that appear to meet your needs but are in fact unsuitable. Say you replace equity funds with municipal-bond funds because the stock market is volatile and the main interest is tax-free. This ignores why you bought suitable equity funds: for long-term appreciation and income, plus inflation protection.