Given universe selection, e.g. Universe.DollarVolume.Top(100), what kind of approach is advisable to deal with the risk of shorting an otherwise unknown equity? I can obviously try to scale position by past volatility, but I presume there are more involved risk management methods.

The reason why I mention universe selection is that problem of shorting is greater than with manually selected equities, where you can pick symbols you are reasonably certain are not going to tenfold in value overnight... With universe selection, a naive mean reverting algoritm might decide to short UVX just because it dropped a lot recently. ;)