Market Neutral

Market Neutral

A strategy undertaken by a person or fund attempting to profit from the current direction of the market. A person using the strategy will take both long and short positions at the same time.

Notes:

Managers who hold a market neutral position are able to exploit any momentum in the market. Hedge funds commonly take a market neutral position as they are focused on absolute return as opposed to relative return.

See also: Absolute Return, Hedge Fund, Long, Relative Return, Short

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Market Neutral

In the context of hedge funds, a style of management that has long and short equity exposure with nearly exposure on average to fluctuations in the market. However, the on average qualification is important. The risk of the longs and the shorts could fluctuate through time leading to negative returns when the market falls sharply.