How to Calculate Non-Systematic Risk
- 1). Eliminate any systematic risks from an investment. The best way to do this is to ask yourself a simple question: "Can this be hedged against?" Basically, a systematic risk is one where you can hedge by selling short or signing a futures contract.
- 2). Ask yourself if a risk can be eliminated through diversification. If the answer is yes, then it is non-systematic.
- 3). Establish whether the management of a company you are investing in can affect its risk. If so, then this is another non-systematic risk. Systematic risks cannot be managed against as they affect entire industries rather than single investments.
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