The risk that diversification helps us overcome is known as an unsystematic risk.
Step-by-step explanation:
As the name suggests, it means a situation of a company being affected by a risk that doesn’t exist in other industries. It only takes place in a specific industry. Diversification is taken up to reduce this risk; the companies invest in various sectors rather than sticking to one specific sector.
It also involves allocating various financial instruments for investments. Diversification targets the returns and helps in improving it as the company invests in various categories that perform differently and differ in reactions too.