Hedge fund strategies: Long short 1 | Finance & Capital Markets | Khan Academy

Setting up a simple long-short hedge (assuming the companies have similar beta or correlation with market). Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/hedge-funds/v/hedge-fund-strategies-long-short-2?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/hedge-funds/v/hedge-funds-venture-capital-and-private-equity?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure to the market (so they could, in theory, do well in an "up" or "down" market as long as they were good at picking the good companies). Today, hedge funds represent a huge class investment funds. They are far less regulated than, say, mutual funds. In exchange for this, they aren't allowed to market or take investments from "unsophisticated" investors. Some use their flexibility to mitigate risk, other use it to amplify it. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Comments

1. In reality, shorts should really only be taken under sound research and most definitely not by mere negative correlation to another stock. The only time to do a long/short paired position is if they are competing in the same industry and have the same target customers (i.e., Nvidia, Radeon (now AMD)) If you want to hedge out market risk as this video is pertaning to, open a short contract on the S&P500 worth x% of your long positions or work with individual options/puts. It's rare to hedge with index futures unless there's a good correlation beta between the individual collection of stocks and the entire index, but nonetheless it's still an option. Long short funds are rarely perfectly hedged and usually long bias, as a good short idea is by far much harder to find than the positively bias market in general. Long/shorts want conviction ideas on both sides of the market, usually 70/30 or 80/20 (long to short ratio) resulting in what is known as a net exposure to the market of 40% or 60% (70-30, 80-20). Perfectly hedged strategies like LTCM in the late 90's resulted in minuscule returns that required obscene amount of leverage (borrowed money) to amplify returns so as history as proven, there is no real way to completely hedge out risk. To end, the general rule of thumb is to always long strong businesses and short the crappy ones, as stock prices ultimately reflect it's company's intrinsic value.
2. pple are DUMB this is called cross hedge ( or at least it kinda looks like it ) you make this type of strategies to limit your risk ( if you buy and sell a correlative market ) you should eliminate your risk ( if A goes up, B goes down, so one cancel the other ) but obviusly A has more volatility than B at the end of the day A should give you a lil bit more profit than B, theorically with this strategy you shouldn't loose money in the markets, but is not that simple, you can easilly lose money in both position at the same time, so I would say that this is a pretty good advanced topic alot of testing should be made before thinking about trying this up with real money.
   
   ( sorry for my english, I know it sucks ) :) 
3. Maybe you explain to us , we are fools
4. Little too risky in my book. Forget about hedge funds, it's 2013 now Low Risk and good yields like penny Stocks are the way to go wellsbee.com provides some good picks in the current market.
5. Can't have made much though, no offense. Depends on what you did, but I imagine that commissions took a ridiculous amount of your profit. Futures and Forex have more leverage, so it's easier to start small.
6. i started trading with only 2000 bucks...its never too small to start..
7. This is THE ONLY way to trade if you want to accumulate wealth.
8. dude what happened with napoleon ? are u going to continue his story or not ?
9. @vickiormindyb wat