What distinguishes systematic risk from unsystematic risk?

Systematic risk is defined as the risk that impacts the entire market or a significant portion of it, rather than being isolated to a specific company or industry. This type of risk is often attributed to broad factors such as economic events, political instability, changes in interest rates, or natural disasters that can affect all businesses to some degree.

Investors cannot eliminate systematic risk through diversification because it is inherent to the entire market. This contrasts with unsystematic risk, which is specific to individual companies or industries and can be mitigated through a diversified investment portfolio. Thus, understanding that systematic risk encompasses market-wide influences is crucial for financial management and investment strategy.

The other options misrepresent the nature of systematic risk, focusing either on specific aspects or inaccuracies that do not capture its defining characteristic of impacting the overall market.