What is another term commonly used for systematic risk?

Systematic risk, which is often referred to as market risk, reflects the inherent risks that affect the entire market or a segment of the market. This type of risk is influenced by factors such as economic conditions, political events, changes in interest rates, and natural disasters, all of which can lead to broader market volatility or downturns.

Investors cannot eliminate systemic risk through diversification because it impacts the entire market or a whole asset class, unlike specific risks that pertain to a particular company or industry. Therefore, understanding systematic risk is crucial for portfolio management and investment strategies, as it helps in gauging the overall market environment and guide decisions on risk exposure.

Other terms related to risks in the context of investing have different meanings. Specific risk, individual risk, and investment risk pertain more to particular securities, companies, or situations rather than the overarching market conditions that define systematic risk.