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Questions tagged [market-neutral]

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Combining trading signals (equity long/short strategy)

Currently, I have developed three separate trading strategies on equity securities. All involve taking long and short positions in the top and bottom decile with respect to some measure (say, a ...
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Should I resolve factor collinearity before hedging?

Goal: I want to run a portfolio, daily or weekly rebalanced, with a target idio vol %. Thus I will be market neutral, sector neutral and maintain some style exposure at 70-80% idio overall. Okay, this ...
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Minimizing variance of market neutral portfolio given factor covariance matrix and stock return predictions

If I am given a return prediction and factor exposures for say 50 stocks, as well as the factor covariance matrix, what is the process to determine the weightings of the minimum variance portfolio, ...
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Does imbalance not impact returns-calculation weighing when calculating the Sharpe Ratio of an equity Long-Short strategy?

I'm calculating the Sharpe Ratio for a simple equity long-short strategy (short stock S and use proceeds to buy stock L). Obviously this is self-financing. In "https://quant.stackexchange.com/...
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1 answer
287 views

When / how do I vol-scale portfolio weights when optimizing the portfolio?

I have a set of portfolio weights $w$. I'm using cvxpy to optimise the portfolio sharpe, subject to a set of constraints. $$ \text{maximize} \hspace{10mm} \mu^Tw - ...
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1k views

How to get the weights for a beta neutral portfolio?

Given a ranking of 100 long stocks and 100 short stocks. Looking at these 200 betas: How can I find the optimal weights to get a beta = 0 long/short portfolio?
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Market neutral without short selling

Would it be possible to design a market neutral strategy without short selling? According to Investopedia: Market-neutral strategies are often attained by taking matching long and short ...
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1 answer
1k views

How to implement industry neutralization?

How do you implement industry neutralization in S&P top 3000/top200? Market neutralization is straightforward but how do you assigns weights to the industries and then to stocks in it?
2 votes
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133 views

References about market neutral portfolios that isolate unsystematic risk

I am looking for references, information, backtests etc. about market neutral portfolios that go long the index and short stocks of that index with high unsystematic (idiosyncratic) risk. The idea is ...
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2k views

Dollar-Neutral in addition to Market-Neutral?

What is the point/benefit of using a dollar-neutral strategy in addition to a Beta-neutral strategy? What exactly does a dollar-neutral strategy buy the investor? What's useful about balancing long ...