oneboy

never heard of trading risk , but in going thru the problem , it looks like it means that a mispricing which is expected to revert to the norm , never does , because of low liquidity and no interest in the stock . This is chronic inefficiency( mispricing) caused by wide bid ask , and no attempt to correct it, so you as the investor/trader are left holding the bag.

I would think fundamental risk is a systematic risk ( such as a small cap risk or a sector risk e.g. Energy stock with energy sector characteristic)

i.e. there is a fundamental theme to the trade that you are NOT interested in . You do want to exploit the idiosyncratic opportunity of the stock , but remove the fundamental risk component , so you find a partner stock ( same industry but obviously not same idiosyncratic opportunity ) and short it. So you remove the sector theme and look for the stock opportunity