is hedging an imperfect science 
yes a perfect hedge would eliminate all risk in a position or portfolio in other words the hedge is 100 inversely correlated to the vulnerable asset this is purely hypothetical but even the hypothetical perfect hedge has a cost that subtracts from its gain the bottom linehedging is an important financial concept that allows investors and traders to minimize various risk exposures a hedge is effectively an offsetting or opposite position taken that will gain or lose in value as the primary position loses or gains value a hedge can be thought of as a sort of insurance policy on an investment or a portfolio these offsetting positions can be achieved using closely related assets or through diversification among professional traders the most common and effective hedge uses derivatives such as futures forward or options contracts 