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Is It Possible to Minimize Systematic Risk

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Is It Possible to Minimize Systematic Risk?

You may have a question in your mind that is it possible to minimize systematic risk? If you have then I am right here with your answer. After reading this hope you will understand what actually systematic risk is, what are the factors related with this and is there any way to minimize systematic risk or not.

First of all, let me explain the meaning of systematic risk. The risk associated with macroeconomic factors like; market interest rate, inflation, the rate of unemployment, economic recession, oil price etc. are the source of systematic risk. These factors cannot be changed or influenced by individual or organization. Normally risk which cannot be minimized through diversification of investment is considered as a systematic risk. In another sense risk which is beyond the control of individuals or organization is a systematic risk.

Minimizing risk is possible only through investing in negatively correlated financial securities. Here negatively correlated means the return of an individual security is not directly related to the return of other securities.

The main thing is, through diversification only we can minimize unsystematic risk portion which is arisen from the microeconomic factors. Because microeconomic factors can be controlled by individuals or organization through taking a proper economic decision. So at this point, we basically can say the unsystematic risk is a controllable and systematic risk is out of control, but the question is why systematic risk is out of control?

The influencing factors of systematic risk come from macroeconomic sources which are beyond our control. As individuals we do not have control over the unemployment rate of our country, we cannot reduce or control the inflation rate, we cannot fix the oil price, we cannot change the market interest rate, we cannot improve our unexpected economic recession situation by our own. Only proper economic policy taken by government can influence/ change or control these factors. That’s why as an individual’s we cannot minimize systematic risk.

It is not necessary that the percent of systematic risk always remain fixed. It can vary according to the change of economic condition. When there is a recession, more systematic risk will be there. For economic boom situation, the market provides more income, ensure less unemployment. And for these, there will have a less systematic risk.

Is It Possible to Minimize Systematic Risk

Beta is the measures of Systematic Risk, which is the function of macroeconomic factors. We can calculate systematic risk by:

Systematic Risk (Beta) = Covariance between Individual Securities & Market/ Variance of Market

You know that a market beta (Systematic Risk) is always 1. If your investment (Securities) beta is less than 1 then your investment is more stable (less systematic risk) than the market. On the other hand if your investment (Securities) beta is more than 1 then your investment will more unstable (more systematic risk) compared with the market.

At the end of these brief explanation, we can say that it is not possible to minimize the systematic risk. So it would be wise decision to work for minimizing unsystematic risk through diversifying your investment and try to make an optimal portfolio.

If you like this article then please leave your comment, or if you have any confusion about this topic then let me know.

Is It Possible to Minimize Systematic Risk

Written by: Md. Nahian Mahmud Shaikat

Mail: [email protected]

Financial Analyst

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Yarn Count

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Direct Yarn Numbering (Yarn Count) System

Count is a numerical value which is used to express the fineness or coarseness of the yarn. yarn count also indicates the relationship between length and weight of the yarn. So, as definition of yarn count we also can say yarn count has been introduced as a certain ratio of length to weight or weight to length.

Types of yarn count

There two types of yarn count system. They are as follows.

  1. Direct Count System
  2. Indirect Count System
yarn count

Textile Yarn

Direct Count System

Direct count is determined by the weight of a fixed length of yarn. The weight per unit length is the count (direct count). The common features of all direct yarn count systems are the length of yarn is fixed and the weight of yarn varies according to its fineness.

We should remember in direct yarn count system

  • In direct count system Length is fixed.
  • Higher the yarn number coarser the yarn and
  • Lower yarn number finer the yarn.

The following formula is used to calculate the direct yarn count

N = (W × l)/L

Here,

N = Yarn count or numbering system

W = Weight of the sample

L = Length of the sample

l = Unit of length of the sample.

Some direct yarn count system

  1. Tex system
  2. Denier system
  3. Decitex
  4. Militex
  5. Kilotex
  6. Jute count

Brief definition of the above direct count system

As I have given the definition above, now here I am going to present brief definition of above direct count system.

Tex system    : Number of grams per 1000 meters.

Denier            : Number of grams per 9000 meters.

Decitex           : Number of grams per 10,000 meters

Militex            : Number of milligrams per 1000 meters

Kilotex            : Number of kilograms per 1000 meters

Jute count     : No. of pound (lb) per 14,400 yards

Indirect Count System: (Will discuss in my next article. Remain with us.)

Discussion

Example :

Now I am going to disscuss about direct yarn count system with an example so that we can understand it more clearly.

  • Suppose 35 Tex,

What 35 Tex defines?

35 Tex means 1000 meters of yarn weigh 35 gram. If 1000 meter long yarn gives 35 gram weight then it is called 35 Tex. Hope it is clear now.

Others direct yarn count system also define so,

Wish it was helpful. Now I am going to ask you some question about direct count system. Try to solve these questions by yourself. Or, you can also give your answer as comment below the post. I will discuss about these following question in my upcoming post. If you have any other question never hesitate to ask me.

Questions :

  1. 20 Tex defines…………………
  2. 35 Denier defines………………..
  3. 35 Tex defines………………………
  4. 10 Decitex define…………………….
  5. 5 Kilotex defines………………………..
  6. 10 Jute count defines……………………..

Written by

Engineer Sheikh Nurja

B.Sc engineer of textile

Merchandiser at buying house

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