In this episode, we dissect a real-world implementation of beta hedging, a strategy to reduce a portfolio's sensitivity to market movements and isolate true alpha. Drawing from a detailed article on quantitative trading rules, we walk through the motivation, theory, execution, and results of using short S&P 500 futures to hedge a mean-reversion strategy with a 0.57 market beta.

We cover:

• What beta hedging is and why it matters

• How a dynamic hedge using ES futures was designed and implemented

• Surprising outcomes like increased alpha and reduced R²

• Trade-offs, including a small increase in max drawdown

• What this says about systematic risk vs. true skill

Whether you're a quant, a strategist, or just hedge-curious, this episode delivers practical insights into managing portfolio exposure and digging into the real sources of return.

Is your alpha real, or just riding the market wave? Tune in and find out.

Find the full research paper here: https://community.quantopian.com/c/community-forums/beta-hedging-quantitativoFor more quant-focused content, join us at ⁠⁠⁠⁠https://community.quantopian.com⁠⁠⁠⁠. There, you can explore a wealth of resources, connect with fellow quants, engage in insightful discussions, and enhance your skills through our extensive range of online courses.Quant Radio is an AI-generated podcast, intended to help people develop their knowledge and skills in Quant finance. This podcast is not intended to provide investment advice.