I am studying the Markowitz portfolio optimization theory, and I just wanted to ask if I understood this correctly. For a stock portfolio we distinguish two kinds of risks: an unsystematic risk, which is due to the correlations between the stocks and which can be minimized by diversification, and a systematic risk, which is due to general trends in the market and which cannot be reduced by diversification.
So, Markowitz portfolio optimization is a procedure to minimize this unsystematic risk by choosing appropriate weights. Right? It only deals with the unsystematic risk and not with the systematic one. Is there a way to reduce the systematic risk?