What is the main risk associated with systematic risk?

Systematic risk refers to the inherent risk that is associated with the overall market or a segment of the market, as opposed to the risk associated with individual securities. This type of risk is influenced by factors such as economic events, geopolitical issues, interest rates, inflation, and overall market sentiment. Because it impacts the entire market or market segment, it is often referred to as "market risk" and cannot be eliminated through diversification within a portfolio.

While individual securities may be affected by idiosyncratic risks (risks unique to a particular company or industry), systematic risk permeates all investments and can lead to broader economic consequences. In contrast to this risk, the other choices focus either on characteristics of specific risks (like systemic risks being diversifiable) or on the scope of impact (affecting individual securities), which do not accurately capture the essence of systematic risk. The ability to quantify or measure risk is also not unique to systematic risk, making that aspect less relevant.