• Market neutral refers to a type of investment strategy used by investment managers who seek to profit from both rising and falling prices in financial markets.

  • Known as a market-neutral strategy, investment choices aim to avoid significant losses as long and short positions hedge each other.
  • Market-neutral strategies are often used by hedge funds because their investment objective is absolute returns, not relative returns.
  • The two main types of market-neutral strategies that fund managers use are fundamental arbitrage and statistical arbitrage.
  • Market-neutral strategies have one of the lowest positive market correlations because they place specific bets on stock price convergence, hedging overall market risk.