Systematic Risk (Market Risk)

Systematic risk is the risk inherent to the entire market or economy, like a recession, a rate hike, or a geopolitical shock, that affects nearly every asset to some degree and cannot be eliminated through diversification. It is the risk you are left with even after building a well-diversified portfolio.

Beta measures a stock's sensitivity to this market-wide risk specifically, which is why systematic risk is sometimes called "non-diversifiable risk": you can spread it across many holdings, but a broad market decline still pulls a diversified portfolio down with it, just usually by less than the most volatile individual holdings would have fallen alone.