@Tim - this algo doesnt go long and short on the same underlying, so it is not hedged.
The theory of this algo is that bonds and stocks usually behave inversely to each other, so if one is going up, the other should be going down. As such, they act as a hedge to each other. Personally I dont agree with this theory as I believe bonds are much more strongly tied to interest rates than stock markets, but since we dont have enough data to backtest farther into history, it is hard to test with this algo.
@Tyler - if you look at the transactions, it does both buy and sell. The goal of the algo is to keep the 50/50 balance, so all it does is rebalance.