Natural Hedge

Filed Under » ,
Dictionary Says

Definition of 'Natural Hedge'

A method of reducing financial risk by investing in two different financial instruments whose performance tends to cancel each other out. A natural hedge is unlike other types of hedges in that it does not require the use of sophisticated financial products such as forwards or derivatives. However, most hedges (natural or otherwise) are imperfect, and do not eliminate risk completely.
Investopedia Says

Investopedia explains 'Natural Hedge'

For example, bonds are a natural hedge against stocks because bonds tend to perform well when stocks are performing poorly and vice versa. Pair trading is another type of natural hedge. It involves buying long and short positions in highly correlated stocks because the performance of one will offset the performance of the other.  

Related Definitions

Search results for

'Natural Hedge'

  • Brigham Exploration: A Hedge Againt Natural Gas

    http://stocks.investopedia.com/stock-analysis/2009/Brigham-Exploration-A-Hedge-Againt-Natural-Gas-BEXP0825.aspx
    ... Article; Comments (0). Brigham Exploration: A Hedge Againt Natural
    Gas. Posted: Aug 25, 2009 09:17 AM by Eric Fox. ...

  • Spice Up Your Portfolio With International Bonds

    http://www.investopedia.com/articles/bonds/08/global-bond.asp?partner=aol-d
    ... Currency Risk While investing in foreign bonds does provide a natural hedge on the
    US dollar, the flip side to this is the risk that the US dollar moves ...

  • Spice Up Your Portfolio With International Bonds

    http://www.investopedia.com/articles/bonds/08/global-bond.asp
    ... Currency Risk While investing in foreign bonds does provide a natural hedge on the
    US dollar, the flip side to this is the risk that the US dollar moves ...

  • How Companies Use Derivatives To Hedge Risk

    http://www.investopedia.com/articles/stocks/04/122204.asp
    ... This effect on both sales and costs is called a natural hedge: the economics
    of the business provide their own hedge mechanism. ...

  • Hedge Your Energy Bets With Linn Energy

    http://stocks.investopedia.com/stock-analysis/2009/Hedge-Your-Energy-Bets-With-Linn-Energy-LINE0525.aspx
    ... Energy is its hedge program. The company has hedged 100% of its current production
    at prices far above current market prices. In 2009, natural gas production ...

  • Uncovering Oil And Gas Futures

    http://www.investopedia.com/articles/optioninvestor/07/oil_gas.asp
    ... April 28 2011 | Filed Under ยป Derivatives, Futures. Prices for crude oil, crude
    oil products and natural gas futures constantly change in response to new ...

  • How To Profit From Natural Gas - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/1111/How-To-Profit-From-Natural-Gas.aspx
    ... How To Profit From Natural Gas. ... This may be good news to the natural gas industry,
    as well as Pickens, but does the everyday consumer benefit? ...

  • Massive Hedge Fund Failures

    http://www.investopedia.com/articles/mutualfund/05/HedgeFundFailure.asp
    ... After attracting $9 billion worth of assets under management, the hedge fund's energy
    trading strategy failed as it lost over $6 billion on natural gas futures ...

  • Natural Gas Industry: An Investment Guide

    http://www.investopedia.com/articles/stocks/10/investing-in-natural-gas-guide.asp
    ... natural gas equivalents. Hedging Natural gas companies also hedge production
    using collars, swaps, puts and other derivatives. This is ...

  • A Look Inside The Natural Gas Pipeline

    http://stocks.investopedia.com/stock-analysis/2012/A-Look-Inside-The-Natural-Gas-Pipeline-UNG-SWN-LNG-EP0104.aspx
    ... amid stiff resistance, that a practical push toward energy independence in the United
    States begins with natural gas. Proponents like hedge fund billionaire T ...

Related Articles

Partner Links