If possible, the asset for the hedging instrument should be the same as the underlying position.
For example, crude oil positions are best hedged with crude oil instruments. However, crude oil
positions can be reasonably hedged by other oil products, such as gasoline and heating oil,
because all of them generally move in the same direction and in similar magnitudes. Buying gold
on the spot market to hedge long-term U.S. inflation and U.S. dollar depreciation risk is one
example of a hedge that does not match the cash flow, instrument, and asset; however, it is one
that could potentially work very well.