Systematic Risk
Definition
Market-wide risk that affects all securities and cannot be eliminated through diversification — also called market risk or non-diversifiable risk.
Explanation
Systematic risk includes: market risk (broad market declines), interest rate risk, inflation risk, currency risk, and geopolitical risk. Beta measures a security's exposure to systematic risk. CAPM predicts that investors are only compensated for bearing systematic risk — idiosyncratic (company-specific) risk can be diversified away and therefore earns no risk premium. In practice, approximately 20-30 stocks eliminate most diversifiable risk, but systematic risk remains regardless of portfolio size.
How Stoquity Uses This
Stoquity incorporates systematic risk analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.