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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.
Convertible arbitrage is a market-neutral investment strategy often employed by hedge funds.It involves the simultaneous purchase of convertible securities and the short sale of the same issuer's common stock.
Market neutral strategies can be seen as the limiting case of equity long/short, in which the long and short portfolios of the fund are balanced with great care so that a very high degree of hedging is achieved. Some advantages of market neutral strategies include being able to generate positive returns in a down market, and generating returns ...
Consider market neutral funds, which aim to provide stable returns and mitigate risk in various stock market environments. But like with any investment strategy, it's worth weighing the ...
In ‘market-neutral’ strategies, you are assuming that the CAPM model is valid and that beta is a correct estimate of systematic risk—if this is not the case, your hedge may not properly protect you in the event of a shift in the markets. Note there are other theories on how to estimate market risk—such as the Fama-French Factors.
Equity market neutral: exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, country, which also creates a hedge against broader market factors. Convertible arbitrage: exploit pricing inefficiencies between convertible securities and the corresponding stocks.