Systematic risk, often called market risk, is the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets. These factors include economic, social, and political changes. For example, during a recession, the stock market typically declines, and this decline affects the majority of stocks regardless of the individual company’s performance. Unlike unsystematic risk, which is specific to a single asset or a small group of assets, systematic risk cannot be eliminated through diversification; rather, it can only be managed through various investment strategies.