A hedge is insurance. Holding stock and buying a protective-put is a hedge. Being long a portfolio and short an index future is a hedge. Producers of oil sell cl futures to hedge their future output.
Hedges cost money (premium, spread, or missed gains) and are imperfect when the hedge and the position are not perfectly correlated (see correlation). They are not the same as reducing size, which is often the simpler choice.
Example: you hold $100,000 of a stock and buy puts costing $2,000 that pay off below $90. Your worst case is capped near -12% including the premium, and you have spent 2% of the position for that protection.
Related: protective-put, collar, correlation, diversification