Is market neutrality really that important?
When I started trading futures a few years ago, I was obsessed with the idea of market neutrality. I was primarily trying to put together a portfolio that was as market neutral as possible. In practice, I faced the fact that complete market neutrality is, in principle, impossible to achieve due to the nature of non-stationarity in the market. I complained about this to my brilliant friend. He replied to me, “Why on earth do we need market neutrality when our only goal is to make money?”. After thinking about his words, I quickly began to understand what the point of the portfolio really is and what I should be doing. I was able to solve the task simply by combining the least correlated instruments with the maximum unit of return and forgetting about the beautiful abstraction of complete market neutrality. From that moment on, I’ve been on a roll.