Cross-Asset Hedging with CFDs for Market Neutrality
Cross-asset hedging is a strategy used by traders to balance long and short positions in various assets. In CFD trading, this approach is quite useful for maintaining market neutrality in order to minimize exposure to the movements of the overall market and still capitalize on opportunities for specific assets. It would be to take positions in two or more assets not directly correlated, hence decreasing the impact of market fluctuations in the overall portfolio.
The fundamental concept behind cross-asset hedging is to hedge a position using another position. In other words, if a trader has a long position in one asset that closely relates to another asset, then he or she can sell short the second asset in order to hedge against the possible unfavorable market movements in the former. In...