Hi! This is probably a very simple question, but here is: Let's assume I believe a stock will underperform another. Is there a way to make profit from that knowledge? Lots of Greetings! Volker
Based on the very probable assumption that you are wrong, short the outperformer and go long on the underperformer.
Belief is not Knowledge. In effect, you are asking how to profit from guessing, and that doesn't have a simple answer.
It was just a curiosity question, whether this is possible in principle. It popped up in a discussion with someone. I thought that it's possible, given any information about the market, to create a portfolio that makes a profit if that information turns out to be right. Relative performance was just an example where I couldn't think of a solution offhand. Also the discussion I had with these guys wasn't specific enough for things like absolute delta or some sort of fractional gain. Anyway, thanks a lot for your answers! Volker