The correct answer is C. diversifiable risk.
Diversifiable risk is the risk that can be reduced by holding a diversified portfolio of assets. This type of risk is caused by factors that are specific to individual companies or industries, such as management decisions, product failures, and changes in government regulations. By holding a portfolio of assets that are not perfectly correlated, investors can reduce their exposure to diversifiable risk.
Stock risk is the risk that an individual stock will underperform the market. This type of risk is caused by factors that are specific to the company, such as its financial health, its industry, and its management team. Investors can reduce their exposure to stock risk by diversifying their portfolio across different stocks and industries.
Portfolio risk is the overall risk of a portfolio of assets. This type of risk is a combination of diversifiable risk and market risk. Market risk is the risk that the entire market will decline in value. This type of risk cannot be reduced by diversification, as all assets in the market are affected by the same factors, such as economic conditions and interest rates.
Therefore, the correct answer is C. diversifiable risk.