@Connor - there are 2 definitions of hedging.
- The concept of hedging commonly accepted in the entire investing world
- The Quantopian definition of hedging used for their contest
1) The concept of hedging in general is reducing market risk. This is done by offsetting a long position with a related short position. So for example if you go short in a gold ETF, and you also go short in an inverse gold ETF, you are fully hedged. This is 2 short positions, but should not be mistaken for "not being hedged".
2) The Quantopian definition of hedging (used in their contest) requires that you have a long position AND a short position. This is because they want to be able to programatically identify algos which are hedged. This is really-dumb-hedging-so-it-can-be-done-programmatically type of hedging. This is not realistic at all, and is easily gamed.
The algo you proposed is not hedged via definition 1, it is only hedged via definition 2. The algo I proposed is not hedged via definition 2, it is only hedged via definition 1.
Many ways to skin the cat :)