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What does neutral strategy mean?
Market-neutral strategy refers to the simultaneous construction of long and short positions in any market environment to hedge market risks and obtain stable returns. The neutral strategy of the stock market includes two basic types: statistical arbitrage and fundamental arbitrage.

According to the different quantitative strategies used by bulls, stock neutral strategies can be divided into the following categories: transactional strategies: quantitative stock selection model is mainly based on quantity and price factors, with high turnover rate, and trading is the main source of strategic alpha income.

Traditional multi-factor strategy: the quantitative stock selection model is mainly based on fundamental factors, and the turnover rate is lower than the trading strategy. Fundamental factor stock selection is the main source of strategic alpha income.

Machine learning strategy: use machine learning algorithm as the basis of multi-head stock selection, and pay extra attention to its nonlinear part on the basis of general linear model.

T+0 strategy: T+0 transaction is the main source of strategy Alpha income, which can be subdivided into manual T+0 strategy based on labor and machine T+0 strategy based on programmed transaction according to operation mode. In addition, the T+0 strategy can also be divided into general T+0 strategy and short T+0 strategy according to whether the manager builds a multi-head terminal. On the premise of completely hedging the risk exposure, the latter can use spread trading with high turnover rate to gradually accumulate Alpha income by short selling mechanism.

The stock neutral strategy specifically constitutes a neutral strategy, which refers to a combination strategy that uses various hedging tools to establish short positions on the basis of a spot variety to achieve zero sensitivity to systemic risks and absolute Alpha returns. There are various combinations of neutral strategies, and stock neutral strategy refers to the neutral strategy in which bulls are composed of stocks. The components of the neutral strategy of dismantling stocks can be divided into three parts: multi-end, hedging and neutral. Stock long position: take quantitative long position strategy into account the main investment methods (medium and long term, centralized positions, etc.). ) is adopted by subjective long strategy, and it is difficult to obtain stable income effectively through hedging in the current market environment, which is not in line with the original intention of stock neutral strategy design. Therefore, at present, managers usually choose quantitative long strategy in stock neutral strategy.

Hedge end: there are few options for hedging tools. At present, the hedging tools used in the stock neutral strategy in the market are mainly stock index futures and OTC securities lending.

Stock index futures: Stock index futures are the most widely used hedging tools in the market at present. As a hedging tool, the advantage of stock index futures lies in its high liquidity and convenient trading, while the disadvantage lies in the fluctuation of premium and basis in the stock index futures market, which will greatly disrupt the effectiveness of the strategy. After the 20 15 stock market crash, the stock index futures market encountered strict supervision, high margin requirements and long-term discount. In recent years, as the main hedging tool of stock neutral strategy, the discount degree of IC contract has been in the range of 10%- 15%, which makes the cost of using stock neutral strategy to hedge stock index futures high. In addition, the basis will quickly converge or expand when the market is in a special period or when there is extreme market, which makes the net value of stock neutral strategy products fluctuate greatly.

Off-site and off-site securities lending: At present, on-site securities lending tools can be divided into two categories, one is individual stock securities lending, and the other is ETF securities lending. Stock short selling is the best hedging tool of stock neutral strategy, which can achieve fine hedging at both ends of long and short positions and obtain negative Alpha returns, while ETF short selling has a slightly lower hedging cost than using stock index futures. However, due to the lack of a perfect securities lending mechanism in China, the supply, coverage, transaction convenience and related costs of the overall securities lending target in the market still cannot effectively meet the strong demand of stock neutral strategy. In recent years, in the case of serious shortage of on-site securities lending and high cost, off-site securities lending has begun to rise, and some managers will also choose to sign SAC agreements with brokers or futures risk subsidiaries to hedge securities lending by means of income swap and block trading.

Neutrality: As the core of how to avoid risks by combining long and short positions, it is essential to discuss the "neutral" part of stock neutrality strategy. Usually, the neutrality mentioned in this strategy includes the following three categories: beta neutrality, industry neutrality and market value neutrality.

Beta neutrality: define beta coefficient first. Beta coefficient measures the price fluctuation of an asset relative to the overall market (index). The greater its absolute value, the greater the change range of income relative to the overall market price (index). Beta neutrality means that the exposure of the beta coefficient combination of bulls and hedges in the stock neutral strategy portfolio is 0. By keeping beta neutral, you can get the absolute alpha income brought by both ends of the long and short after filtering market fluctuations. Due to the restriction of the use of domestic hedging instruments and the serious shortage of supply, it is usually difficult for stock neutral strategy to effectively obtain the income of Alpha short position. Therefore, at present, the income of stock neutral strategy is mainly the income of alpha bulls obtained after stripping long-term beta with stock index futures.

Industry neutrality: industry neutrality refers to the consistency of the allocation of long positions and hedging positions in the strategy portfolio within the industry sector, so as to ensure that the long positions are not affected by the switching of market industry styles and the stability of related Alpha. Because domestic stock index futures are mostly used as hedging tools of stock neutral strategy, it is generally required for multi-head industries to allocate the index corresponding to the futures varieties used by the benchmark hedging end.

Market value neutrality: market value neutrality is similar to industry neutrality, which means that the long-term and hedging sides in the strategic portfolio are consistent in the allocation of large, medium and small-cap stocks, so as to ensure that the long-term is not affected by the market style switching of large, medium and small-cap stocks and the related Alpha stability. The obvious retracement of Ming _ Neutral series products mentioned at the beginning of this article in the first half of this year is due to the excessive market exposure of this strategy in large-cap stocks. According to the investor's letter of apology issued on March 9th, 2002 1, it can be known that since June this year 1, it has used the market data of the past six months to1as the data source for machine learning training, resulting in the bull-related strategy focusing on the fund's "holding group" stocks (high-quality large-cap stocks), and the proportion of large and small stocks is obviously exposed. Although the neutral strategy products performed well at the beginning of the year, after the Spring Festival this year, their performance trends also showed obvious reversal under the situation that the styles of large and small disks were greatly reversed.

In addition to the above three factors, there are also factors such as profitability and liquidity that need to be considered. Theoretically, the portfolio of stock neutral strategy can achieve perfect neutrality of all elements, that is, long and short ends can be completely hedged. However, in this case, all the benefits of stock neutral strategy are completely hedged with risks, and this strategy is meaningless. However, in actual investment, objective investment environment factors (investment varieties, transaction costs, etc. ) makes the strategy not completely neutral, but the stock neutral strategy also benefits from various factors. In essence, neutrality is a constant trade-off between the return and risk exposure of strategic portfolio. Managers give different answers to this question based on their own investment ideas and objective investment environment.

Stock neutral strategy income characteristics and allocation value Stock neutral strategy income characteristics: smooth curve, small fluctuation. The risk-adjusted income of stock neutral strategy is usually weaker than that of stock long strategy but significantly stronger than that of bond strategy, and its fluctuation characteristics are similar to those of bond strategy. According to the statistics of typical index of neutral strategy in Chaoyang perpetual fund research platform, since 20 15 12 3 1, the annualized rate of return of neutral strategy in the stock market is about 6.30%, the maximum retracement in the interval is 5.36%, the annualized volatility is about 4.00%, and the sharp ratio is about1.

Equity neutral strategy allocation value: hedging cost and income stability are the key. Since 20 18, the bond market has been thundering (there are many 3A high-rated state-owned enterprise background bonds), and the strategic returns of bonds have fallen sharply under the low interest rate environment, and the new asset management regulations have broken the bank wealth management products. Investors need to find alternative products with stable returns under the premise of controllable risks. In the bull market, the income is considerable, and in the bear market, it can also maintain a relatively stable positive income. The stock neutral strategy of using hedging tools to filter market risks is the answer to this question.

However, when the market comes to 202 1 and the market scale and industry style switch rapidly, the price-performance ratio of stock neutral strategy is not as good as that of stock long strategy. Taking Rubik's Cube Quantization as an example, according to the existing data of Chaoyang Perpetual Fund Research Platform, as of September 202 1 0, 10, this year, the product with the highest yield of Rubik's Cube stock neutral strategy products is * * * * *, with a cumulative yield of 7.39%, a maximum withdrawal of 3.08% and a withdrawal ratio of 2.40. The magic square index enhancement strategy product with the highest income this year is * * magic square index enhancement. This year, the cumulative yield is 33.42%, the maximum withdrawal rate is 7.84%, and the income withdrawal ratio is 4.26,202 1 year 1 day -202 1 September 1 year. In the stock neutral strategy, the hedging end superimposed in order to control the risk exposure will naturally wear off the multi-terminal related income. Under the current uncertain market environment and the difficulty of hedging, it is difficult to accumulate the benefits of stock neutral strategy. Second, the market hedging cost is high. At present, the stock index futures market is still in a deep discount state, and the stock neutral strategy will naturally bear the discount loss of about 10- 15% as the hedging cost. However, the option cost of hedging securities lending to securities companies is about 8- 12% per year. According to the actual supply situation, the cost of using some active securities is high, and the overall cost is not significantly lower than that of using stock index futures. In addition, after the product income covers the hedging cost, the investor's final income is greatly reduced after deducting the inherent performance reward commission, management fee and custody outsourcing fee. It is no wonder that Rubik's Cube will choose to prompt investors to redeem stock neutral strategy products and choose other strategies with higher cost performance in the current market environment.

Looking forward to the future, the essence of stock neutral strategy is to use various hedging tools to hedge market risks and capture alpha income opportunities. To evaluate the strategy itself, we should not only quantify the dimensions of multi-strategy evaluation, but also pay attention to the exposure of hedging exposure and the impact of hedging cost on the overall return of the strategy. In the future, with the development of the financial market, factors such as the improvement of market trading activity, the gradual enrichment of hedging tools and functions, and the gradual decline of hedging costs will gradually benefit the stock neutral strategy at both ends, and its allocation value will become more obvious with high-quality managers.