Cross Hedge
The act of hedging ones position by taking an offsetting position in another good with similar price movements. Investopedia Says:
Although the two goods are not identical, they are correlated enough to create a hedged position as long as the prices move in the same direction. A good example is cross hedging a crude oil futures contract with a short position in natural gas. Even though these two products are not identical, their price movements are similar enough to use for hedging purposes. Related Terms:
Basis Risk
Forward Contract
Future
Hedge |