State-of-the art Arbitrage Strategy for every market environment
The classification of different
hedge funds is not entirely straightforward since some funds may use a combination of strategies, if they disclose anything at all. These categories can be categorized further in many ways, but our return generating technique should be categorized as a
market neutral statistical arbitrage investment process, which designed to be among the less risky
hedge fund strategies.
The reason we chose
market neutral is because its one of the few products where "neutrality" is a core attribute. Neutrality implies something about what risks are being taken and which are not, so which risks are being taken in market neutral?. The term "market neutral" clearly implies that the portfolio should in some sense be neutral with respect to the market itself. Believing that equities behave in a mathematically describable manner, we can implement a
low-risk, market-neutral analytical equity strategy.
Equity Market Neutral investment refers to funds that
hedge against market risk factors, thereby becoming "neutral" to the market.
Market Neutral- Statistical Arbitrage utilizes quantitative analysis of technical factors to exploit pricing inefficiencies between related assets, neutralizing exposure to market risk by combining long and short positions. It is an
Arbitrage process of buying assets in one market and selling them in another to profit from unjustifiable price differences. This violates the expectation that the same product should sell for the same price.
The ability to
hedge is a necessary condition for
arbitrage because it can eliminate risk. Thus, a hedging transaction is intended to reduce or eliminate the risk of a primary security or portfolio position. An investor consequently establishes a secondary position that is designed to counterbalance some or all of the risk associated with another
investmentposition.
This strategy can also be classified as
absolute return strategy since the return is independent of the performance of the underlying market and hence a return may be generated whether the market goes up or down.
Absolute return strategies represent an investment style or discipline, and are usually classified as a subset of the alternative asset investment class. Absolute return performance is primarily derived from
RCGF manager skill, and not from the overall direction of a traditional market, such as equities or fixed income.
There are tremendous advantages to having an
equity market neutral style in an investment portfolio. Notably, returns are independent and uncorrelated to market direction. Volatility is usually low. Returns are often attractive and constant regardless of market or economic downturns.
Equity market neutral strategies often complement other investment strategies, providing a balanced and diversified portfolio.
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