Is it possible to build a risk model that only has 2 industry risk factors? For example, if I wanted just Tobacco and Healthcare industries as risk factors can I do that? If I did that do I have to create a third bucket called other?
If the information from a 3rd factor can be derived from the information in the other 2 factors, then the 3rd factor is redundant and is not necessary.
But as others have commented, probably not a great risk model. If one is uncomfortable with the risk in those sectors, it might be best to use a filter to screen those industries out of your portfolio.