Hedge Fund Strategies - Setting Up a Long Short Profitable Strategy

This short video from Khan Academy illustrates how to setup a simple long-short hedge (assuming the companies have similar beta or correlation with market). In a long-short strategy, you identify the stocks that will outperform the market and the ones that will under perform the market. Since you can not predict will full confidence as to how the market will perform, you build a hedged portfolio in which you buy the stocks that you think will outperform and short (sell) the stocks that will underperform the market.