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Hedging can be part of the Investment Strategy for a Stock Portfolio. Hedging often involves reducing exposure to the Stock Market via derivatives, selling Futures or buying Put Options or Diversification.

When a Hedge position is incorporated into a Stock Portfolio, an Offsetting Position has been opened to counterbalance the Long Positions. The Stock Market can be negatively impacted by unforeseen events, sharp drawdowns that do not discriminate. The objective in Hedging is to limit the impact of these drawdowns. A hedge can be implemented in several ways. Firstly, by buying a Stock that is an offsetting position due to a low level of correlation, or Diversification. Secondly, a Hedge can be by Short Selling a Stock. The Long and Short positions combined, should reduce the overall market exposure. Thirdly, a Hedging Strategy can be opened via Derivatives, Futures or Options. Short selling of Index Futures will reduce the overall Market or Beta risk in a portfolio. Or simply buy a Put Option.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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Smartest Data aims to be your go-to source for analysis and commentary on Investments, Personal Finance and the Global Stock Markets. The aim is to provide our readers with insightful and actionable information for independent minded Investors.  Dissecting  the daily avalanche of Data produced by the Stocks Market by using data Websites  and Apps available to people at home. Join us, to be Driven by Data to navigate the Investment universe markets and make better informed investment decisions.