Consider forming a portfolio to lower your overall risk

The area designated by B represents :

=

Systematic Risk

Explanation:

~ The graph has number of assets in X axis, and total risk in Y axis.

~ The blue line can be interpreted as = at the point of lowest number of assets in the portfolio, the risk is at the highest point. As more number of assets are added in the portfolio, the risk line is going down, as a result of diversification.

~ However, after one point, despite adding more assets, the risk line is not going lower, it is stagnant and flat at the end.

~ This means that diversification can only eliminate nonsystematic risk, however, SYSTEMATIC RISK cannot be eliminated.

~ Therefore, area "B" represents Systematic Risk. It shows that no matter how many assets you add for diversification, the risk of area "B" will still remain, because systematic risk cannot be reduced or eliminated through diversification.