A hedge fund holds a long position in ABC Corp. The fund uses S&P 500 Index futures to eliminate the systematic risk of its position in ABC. How would an increase in ABC's non-systematic risk affect the hedging effectiveness of the fund's hedged position in the stock? Assume that ABC's systematic risk is not affected by an increase in its non-systematic risk.

Group of answer choices

It would decrease hedging effectiveness.

It would increase hedging effectiveness.

It would have no effect on hedging effectiveness.

Need more information. It depends on the beta.