Systematic Risk
The risk inherent to the entire market or entire market segment. Also known as "un-diversifiable risk" or "market risk."
Investopedia Commentary
Interest rates, recession and wars all represent sources of systematic risk because they will affect the entire market and cannot be avoided through diversification. Whereas this type of risk affects a broad range of securities, unsystematic risk affects a very specific group of securities or an individual security. Systematic risk can be mitigated only by being hedged.
Even a portfolio of well diversified assets cannot escape all risk.
Related Links
The Dangers of Over-Diversification
The Importance Of Diversification
Determining Risk And The Risk Pyramid
Introduction to Value at Risk (VAR) - Part 1
Introduction to Value at Risk (VAR) - Part 2
See also: Diversification, Market Risk, Portfolio, Risk, Unsystematic Risk
systematic risk