Relative Value Hedge Fund Strategy Analysis

In the context of hedge fund investing, Relative Value strategies aim to exploit price discrepancies between related financial instruments. These strategies often involve the simultaneous buying and selling of securities in order to capture arbitrage opportunities. However, they can be complex and carry specific risks. Consider the following scenario:

A hedge fund manager is analyzing two different equity securities within the same industry. The manager believes that while both firms have similar fundamentals, one is undervalued compared to the other based on historical valuation metrics. The manager decides to go long the undervalued security and short the overvalued one.

Which of the following statements regarding the described Relative Value strategy is accurate?