[Verse 1] When markets crash, your stocks fall down That earthquake shakes the whole damn town Systematic risk can't hide or flee It hits every company equally Interest rates and wars abroad Recessions strike like lightning rods No escape from macro pain When the storm clouds bring the rain [Chorus] Systematic spreads across the board Idiosyncratic's company-scored Diversify to cut the hurt Spread your eggs, don't put them in one shirt Beta measures systematic swing Alpha's what the stock can bring Market risk you cannot dodge But pick your companies, build your lodge [Verse 2] CEO gets caught in scandal sheets Product recall, profits retreat Factory burns, the patents expire Idiosyncratic sets stock on fire Company-specific, firm alone These troubles shake just one stock's throne While neighbors stay completely fine Their graphs maintain an upward line [Chorus] Systematic spreads across the board Idiosyncratic's company-scored Diversify to cut the hurt Spread your eggs, don't put them in one shirt Beta measures systematic swing Alpha's what the stock can bring Market risk you cannot dodge But pick your companies, build your lodge [Bridge] Thirty stocks from different trades Manufacturing, tech, and healthcare grades Oil and banks and retail stores Correlation drops and safety soars Systematic stays the same But idiosyncratic loses game Portfolio theory proves it true Mix your holdings, that's what smart investors do [Chorus] Systematic spreads across the board Idiosyncratic's company-scored Diversify to cut the hurt Spread your eggs, don't put them in one shirt Beta measures systematic swing Alpha's what the stock can bring Market risk you cannot dodge But pick your companies, build your lodge [Outro] Market beta, firm-specific alpha Two types of risk, learn the formula Diversification cuts the pain Smart investors break the chain
← Stress Testing and Scenarios | Fat Tails and Extreme Events →