Long Short Equity Strategy (Backtest And Example Analysis)

Hedge funds employ many investing strategies, and the long-short equity strategy is one of them. But what does this long-short equity strategy mean?

Long short equity strategy is a method of investing whereby a trader takes long positions in stocks that are expected to appreciate and, at the same time, takes short positions in stocks that are expected to decline. It is a form of hedging strategy that aims to minimize risk by having both long and short positions while maximizing profits by gaining from the rising values in stocks with long positions and declining values of stocks with short positions.

In this post, we will take a look at the long-short equity strategy and provide you with a specific example. We also make a long short equity backtest at the end of the article.