What is a Long-Short Equity Strategy?
A Long-Short Equity strategy, as the name suggests, involves buying (going long) stocks that are expected to rise while simultaneously selling (going short) stocks that are expected to fall. This allows the strategy to profit from both rising and falling markets, minimizing reliance on overall market volatility.
Example:
If an investor determines through fundamental analysis that Company A is undervalued (expecting its share price to rise) and Company B is overvalued (expecting its share price to fall), they can simultaneously go long on Company A and short on Company B. This balanced long-short position strategy allows the portfolio to profit from both rising and falling markets.
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Long-Short Equity Strategy
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