Market Neutral Investment Strategy

An approach to portfolio management which relies on the investment manager's ability to make money through relative valuation analysis rather than through market direction forecasting. Although approaches vary, market neutral investment techniques are usually designed to generate gains in all or nearly all market scenarios. Market neutrality can be implemented with offsetting futures positions or with offsetting short and long positions. The offset is not necessarily measured in units of dollar exposure, but rather in relative variability units. Market neutrality does not insure non-volatile returns or positive returns. See, for example, Index Arbitrage, Pairs Trading.

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