What is coverage?

Financial hedging, also called hedging, is based on all operations carried out to minimize or eliminate the risk of certain assets or liabilities financial assets owned by a company.

For this, so-called financial hedging operations are carried out, which are new acquisitions of assets, to reduce the risk of losing profitability in the other that we want to insure. This does not imply a formula for making money safely, but financial hedging strategies do help to reduce the chances of large losses.

Hedging investments focus on investing in two stocks that are negatively correlated. This means making compensatory investments in products that normally, if one goes down, the other will go up.

An example of a hedging strategy could be that when investing in currencies, a person makes a strong investment in dollars because he trusts that he can get a good return, but makes another investment in euros, to ensure lower losses, in case the dollar go down.

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