You are the manager of a hedge fund and believe that Honda is going to do really well next year. You are certain that while the automotive industry would offer above average returns in general, Honda is going to outperform Nissan, a rival car company, and you wish to set up a trade. Which of the following strategy would yield positive returns, even if the overall market falls?

Question $34$Answer

$1.$

Long Honda, short Nissan

$2.$

Long Honda, long Nissan

$3.$

Short Honda, long Nissan

$4.$

Short Honda, short Nissan

$5.$

Long Honda, Nissan and Toyota