market-neutral investing

Market-Neutral Investing

An investment strategy in which one seeks to make the same return regardless of the performance of the broader market. There is no single way of executing a market neutral strategy, but it usually involves taking a combination of long positions and short positions. For example, one may take a long position on one index while also taking a short position on a similar but not identical index. Market neutral investing may also involve some form of arbitrage.

market-neutral investing

An investment strategy of attempting to assemble an investment portfolio with a return that is unaffected by returns in the overall market. For example, an investor might buy shares of a petroleum company the investor considers undervalued and sell short an equal value of shares of a different petroleum company the investor considers overvalued. The investor expects to profit regardless of whether the overall market rises or declines. Market-neutral investing utilizes hedging in an attempt to profit from market inefficiencies.