When investors look at the big players on Wall Street, the hedge funds and the investment banks, they aren’t the so-called winners just because they have information sources that most retail traders would have to network for years to get. They are winners because they can use information through strategies that increase their odds ever so slightly over the long run.
While retail investors don’t have access to all this information, they do have ways to replicate some of the main strategies used in these funds and trading desks at the big banks. One of these is the simple concept of long-short equity, otherwise known as relative value. Relative value is, no pun intended, relatively simple, as asset classes and stocks will eventually converge and diverge to levels that often provide great trading opportunities.
