Creating a Credit Strategy for Distressed Debt Investment

XYZ Capital is managing a fixed income portfolio valued at $100 million, focusing on corporate bonds. The firm has identified a potential opportunity in a sector currently facing a downturn due to economic conditions but believes certain companies within that sector have sound fundamentals and will recover.

Your task is to develop a credit strategy to exploit this market inefficiency. Discuss the considerations for security selection, including credit analysis, relative value assessment, and potential risks associated with investing in the distressed sector. Additionally, outline your approach to managing the overall portfolio risk while taking advantage of this credit opportunity.