What defines an equity market neutral strategy?

An equity market neutral strategy is primarily characterized by its intention to eliminate systematic risks associated with market movements. This strategy typically involves taking long positions in certain stocks while simultaneously holding short positions in others. The goal is to achieve a balanced exposure such that the overall equity market risk is minimized or neutralized. By being structured to be market, industry, sector, or dollar neutral, the strategy aims to profit from the relative performance of individual stocks regardless of the overall market direction.

This approach allows investors to focus on stock selection and relative value opportunities rather than being influenced by broader market trends, thus seeking to generate returns that are less correlated with the movements of the equity markets as a whole.

In contrast, the other choices introduce elements that do not align with the core principles of an equity market neutral strategy, focusing instead on specific investment types, risks, or geographical exposure.