The development of a hedging strategy in the dry bulk shipping market can be treated as a portfolio optimization problem. Shipowners will try to achieve an optimal mix of physical contracts and futures depending on the level of risk that they are willing to take. The greater the level or risk tolerance, the greater are the potential gains or losses. In determining a shipowner’s optimal hedging strategy, we can consider the problem as being the identification of an optimal portfolio of market investments, either time charters, voyage charters, and/or freight futures contracts. In this chapter, we begin by introducing the mean–variance portfolio theory in a simplified way, with a portfolio of only two investments. Concepts such as risk-return trade-off, efficient frontier, global minimum variance portfolio, are introduced. To study and understand the Portfolio Theory in a simplified way will allow us to extend the theory to the general case of N investments and apply it to real-world applications.