No hedge is perfect unless you hedge the exact grade at the exact location on the exact date. Everything else leaves basis risk: a jet fuel buyer hedging with heating oil, a Canadian producer hedging with WTI, a portfolio manager hedging small caps with es.
Basis risk is smaller than flat price risk, which is the point, but it is not zero and it tends to blow out precisely in the crises the hedge was bought for.
Example: an airline hedges 1 million gallons of jet fuel with heating-oil futures. Diesel demand spikes while jet demand does not; heating oil rallies 20 cents more than jet fuel, and the hedge overpays by $200,000.
Related: basis, deliverable-grade