1. If the systematic component of the individual stock’s excess return is positive, the total excess return of the individual stock (Ri) may be negative.
2. If the total excess return of the individual stock (Ri) is positive, then the idiosyncratic return component must be positive.
3. If the idiosyncratic component and total excess return of the individual stock (Ri) is negative, the systematic return component must be negative.
Y-axis represents returns for Stock i while X-axis represents market returns.