skycfa

active risk is just your tracking error (or alpha risk)

total risk is both beta risk and alpha risk combined. or you can look at Total Risk as described above (i.e., text book description)

investors are risk adverse with active risk (than compared to total risk) because they are usually benchmark focused. For example, I rather avoid a strategy that has a TE of 10% even if the STD is only at 20% (low) and choose another with a TE of 2% (low) but has a std of 30% (high) because my intention is, say, to capture more of the "benchmark return" (i.e. beta return).

hope that doesn't confuse you even more. lol