Alpha (Alpha neutralisation)

Alpha neutralisation is a financial strategy used to reverse or offset the gains from specific investments (like Alpha) that aim to outperform the market. When an investment generates alpha—extra returns above the market average—investors might want to neutralize this advantage to focus on market movements rather than individual skill. They do this by taking opposite positions in related assets, reducing the overall risk and making the portfolio’s performance depend more on market trends than on specific investment choices. Essentially, alpha neutralisation balances out abnormal returns to create a more market-driven, less skill-dependent portfolio.