The following two statements relate to Capital Asset Pricing Model. Choose the correct code for the statements being correct or incorrect.

Statement I: Beta is a measure of a security's risk relative to the risk of the market portfolio.

Statement II: The value of Beta measures both the systematic and the unsystematic risks of a security.

The correct answer is Statement I is correct, but II is incorrect.

Key Points Statement I: Beta is a measure of a security's risk relative to the risk of the market portfolio.

•  Beta refers to the measure of risk of a stock relative to the market portfolio.

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• The beta of a stock indicates how volatile it is in comparison to the entire market.

• Individual businesses are rated based on how far they depart from the market, with the S&P 500 Index, for instance, having a beta of 1.0 by definition. A stock that has a beta value above 1.0 will fluctuate more than the market over time.

Statement II: The value of Beta measures both the systematic and the unsystematic risks of a security.

• Beta does not assess unsystematic risk, which is the risk unique to a single company, but rather simply the systematic risk, which is the risk relating to the entire market or sector.

• This is due to the fact that it gauges a security's propensity to move concurrently with the stock market's general return.

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• A measure of a security's volatility in proportion to market volatility is known as beta.

Hence, the correct answer is Statement I is correct, but II is incorrect.