How do systematic and unsystematic risk differ?

Unsystematic risk is risk specific to a particular company or industry, and it can be substantially reduced by diversifying across many stocks.

Systematic risk affects the market as a whole, as with the business cycle and interest rates, so it cannot be eliminated even by diversification. The capital asset pricing model (CAPM) explains that the reward for risk is determined in proportion to systematic risk (beta), not total risk.