A Zero-Beta Portfolio is a portfolio that has a beta of zero, meaning that its returns are not expected to be correlated with the returns of the overall market. Beta is a measure of a security's volatility relative to the overall market, with a beta of 1 meaning that the security is expected to move with the market, a beta greater than 1 meaning that it is expected to be more volatile than the market, and a beta less than 1 meaning that it is expected to be less volatile.A zero-beta portfolio is constructed to have a neutral exposure to market risk, which means that its returns should not be impacted by changes in the market. This can be accomplished by creating a balanced portfolio that includes both positive beta and negative beta assets. For example, a portfolio that includes both stocks and bonds would have a beta of approximately zero, as the positive beta of the stocks would be offset by the negative beta of the bonds.Zero-beta portfolios can be useful for investors who are looking to reduce market risk in their portfolios, or for investors who are looking to hedge against market fluctuations. Additionally, zero-beta portfolios can also serve as a benchmark for evaluating the performance of actively managed portfolios.It's important to note that while a zero-beta portfolio can provide a reduction in market risk, it may not necessarily provide protection against other types of risk, such as credit risk, liquidity risk, or inflation risk. As with any investment, it's important to thoroughly understand the risks and to consult with a financial advisor before investing in a zero-beta portfolio or any other investment strategy.
