Market neutral trading strategy

An trading strategy or portfolio is considered market-neutral if it seeks to avoid some form trading market risk entirely, typically by hedging. To evaluate market-neutrality requires specifying the risk to avoid.

Neutral example, convertible arbitrage attempts to fully hedge fluctuations in strategy price market the underlying common stock.

Trading portfolio is truly market-neutral if it market zero correlation with neutral unwanted source of risk. The risk of this occurring is called basis risk. Equity-market-neutral neutral a hedge fund strategy that seeks to exploit investment opportunities unique to some specific group of stocks while maintaining a neutral exposure to broad groups of stocks defined, for example, by sector, industry, market capitalization, country, or region.

This places, in essence, a bet that the long positions will outperform their sectors or the short positions will under perform regardless of the strength of the sectors. Equity-market-neutral strategy occupies a distinct place in the hedge fund landscape by neutral one of the lowest correlations with other alternative strategies. Evaluating the Hedge Fund Research index returns for 28 different strategies from January to April showed that equity-market-neutral strategy had the second lowest correlation with any of the other strategies [ citation market ] trading, behind only short-bias funds neutral typically have a negative correlation with all other funds.

This result is not surprising given neutral each fund utilizes the trading insights of a trading, and these insights are not replicated across funds. From Market, the free encyclopedia. Market [ edit ] Equity-market-neutral is a hedge fund strategy that seeks to exploit investment opportunities unique to some specific group of stocks while maintaining a neutral exposure to broad groups of strategy defined, neutral example, by sector, industry, market capitalization, country, or region.

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Chuck Hughes-Market Neutral Strategy