Systemic risk and correlation risk are highly dependent. Systemic risk occurs when the failure of one or more institutions triggers a cascading chain reaction that affects the entire financial system. This contagion relies heavily on a high degree of interconnectedness, which manifests as high correlation among financial entities, asset prices, and market movements. In times of severe financial stress, asset correlations tend to converge toward 1.0, meaning that previously uncorrelated or diversified assets and entities begin to decline together. Therefore, systemic risk is deeply intertwined with correlation risk, as systemic events are characterized by abrupt and adverse spikes in correlation.