Long-short strategies can be market neutral using a pair trade. Then you can equitize the neutral strategy with a futures contract. In alpha-beta separation, you also have a long-short neutral strategy and you go long an index. I think equitizing a neutral strategy is the same as alpha-beta separation, isn’t it?
Thats what I asked earlier in another thread? I understand it’s essentially the same, but alpha - beta uses portfolio managers to create this effect. Someone correct me if I’m wrong?
Triple A Wrote: ------------------------------------------------------- > Long-short strategies can be market neutral using > a pair trade. Then you can equitize the neutral > strategy with a futures contract. > In alpha-beta separation, you also have a > long-short neutral strategy and you go long an > index. > I think equitizing a neutral strategy is the same > as alpha-beta separation, isn’t it? I’d say equitizing a neutral strategy is the “alpha part” of the alpha-beta separation? You still need to perform the beta part as well 
(eg. going for futures) - sticky
> I’d say equitizing a neutral strategy is the > “alpha part” of the alpha-beta separation? You > still need to perform the beta part as well > (eg. going for futures) > > - sticky I’d say equitizing a neutral strategy is “beta part”, looking for systematic risk. The long-short is the “alpha part”, with net beta positions (some systematic risk) The market neutral is the “alpha part” too, but betas cancel out. (no systematic risk)
UAECFA Wrote: ------------------------------------------------------- > > I’d say equitizing a neutral strategy is the > > “alpha part” of the alpha-beta separation? You > > still need to perform the beta part as well > > (eg. going for futures) > > > > - sticky > > > I’d say equitizing a neutral strategy is “beta > part”, looking for systematic risk. > shit, got the meaning of alpha and beta swapped in my mind! yes, thanks for pointing that out. > The long-short is the “alpha part”, with net beta > positions (some systematic risk) ok > The market neutral is the “alpha part” too, but > betas cancel out. (no systematic risk) Don’t understand this last statement. Could you explain more? - sticky
> > The market neutral is the “alpha part” too, but > > betas cancel out. (no systematic risk) > > Don’t understand this last statement. Could you > explain more? > > - sticky sticky, the portfolio managers will try to attain TWO alhpas. One on the long (undervalued) and one on the short (overvalued). He will also try to find these two in the same industry so that way their beta’s will cancel out to zero. If the market moves in one direction, one stock wins the other loses (you’ve hedged!)
UAECFA Wrote: ------------------------------------------------------- > > > The market neutral is the “alpha part” too, > but > > > betas cancel out. (no systematic risk) > > > > Don’t understand this last statement. Could > you > > explain more? > > > > - sticky > > sticky, > > the portfolio managers will try to attain TWO > alhpas. One on the long (undervalued) and one on > the short (overvalued). He will also try to find > these two in the same industry so that way their > beta’s will cancel out to zero. If the market > moves in one direction, one stock wins the other > loses (you’ve hedged!) thanks. I got “market-neutral” mixed up with “equitizing a neutral strategy”. - sticky