Market neutral index
An investment strategy or portfolio is considered market-neutral if it seeks to avoid some form of market risk entirely, typically by hedging. To evaluate market-neutrality requires specifying the risk to avoid. For example, convertible arbitrage attempts to fully hedge fluctuations in the price of the underlying common stock. A portfolio is truly market-neutral if it exhibits zero correlation with the unwanted source of risk. The risk of this occurring is called basis risk.
Market Neutral
An investment strategy or portfolio is considered market-neutral if it seeks to avoid some form of market risk entirely, typically by hedging. To evaluate market-neutrality requires specifying the risk to avoid. For example, convertible arbitrage attempts to fully hedge fluctuations in the price of the underlying common stock.
A portfolio is truly market-neutral if it exhibits zero correlation with the unwanted source of risk. The risk of this occurring is called basis risk. 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 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 exhibiting 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 needed ] , behind only short-bias funds that typically have a negative correlation with all other funds.
This result is not surprising given that each fund utilizes the unique insights of a manager, and these insights are not replicated across funds.
From Wikipedia, the free encyclopedia. Equity-market-neutral [ 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 stocks defined, for example, by sector, industry, market capitalization, country, or region.
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The IQ Hedge Market Neutral Index seeks to replicate the risk-adjusted return characteristics of the collective hedge funds using a market neutral hedge fund. The Eurekahedge Equity Market Neutral Hedge Fund Index (Bloomberg Ticker - EHFI) is an equally weighted index of 48 constituent funds. The index is.
A market-neutral strategy is a type of investment strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in one or more markets, while attempting to completely avoid some specific form of market risk. Market-neutral strategies are often attained by taking matching long and short positions in different stocks to increase the return from making good stock selections and decreasing the return from broad market movements. There is no single accepted method of employing a market-neutral strategy. Beyond the method mentioned above, market-neutral strategists may also use other tools such as merger arbitrage , shorting sectors, and so on.
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