Pooh
2 posts
msg #31143
- Ignore Pooh |
2/20/2004 4:31:54 AM
Has anyone addressed "Pairs Trading" in this forum?
I am very interested in finding a combination of filters
which would identify a pair of stocks which have the potential
to diverge in price; thereby setting up for a simutaneous long
and short.
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EWZuber
1,373 posts
msg #31149
- Ignore EWZuber |
2/20/2004 10:47:30 AM
One problem with a strategy like that is that one of the stocks you choose will be going against the market trend.
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waltbx
2 posts
msg #70840
- Ignore waltbx |
1/21/2009 7:27:07 PM
I'm interested in pairs trading, also known as statistical arbitrage. It has the great advantage of not being dependent on predicting market direction, only the return of very similar stocks (in the same sector) from an abnormal separation in normally correlating pricing. Hedge funds have used the strategy for years. Here is a link that explains it.
http://www.esignalcentral.com/exchange/07_2005/third_party_spotlight.asp
Has anyone worked out formulas for finding statistacally correlated pairs? There is software that does this (Pair Trade Finder), but it is weak in that it does not allow for including search factors such as rising/decreasing pair RSI, rising/decreasing price ratio, and other factors that Fetcher has the capabilities of doing on individual stocks. I'm hoping it can do it for pairs, also. If someone can work out the ability to work with pairs, I can suggest the search factors needed.
Here is what some websites say about Pairs Trading: Pairs trading is a non-directional, relative value investment strategy that seeks to identify two companies with similar characteristics whose equity securities are currently trading at a price relationship that is out of their historical trading range. This investment strategy entails buying the undervalued security, while short selling the overvalued security, thereby maintaining market neutrality.
For example, if the market as a whole crashes and your two stocks plummet along with it, you should experience a gain on the short position and a negating loss on the long position, leaving your profit close to zero in spite of the large move. In a pairs trade, you are not making a bet on the direction of the stocks in absolute terms, but on the direction of the stocks relative to each other.
Walt B
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Eman93
4,750 posts
msg #70843
- Ignore Eman93
modified |
1/21/2009 11:00:01 PM
etf's make for some intersting pairs
FAZ FAS
DIG DUG
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four
5,087 posts
msg #133452
- Ignore four |
1/1/2017 2:42:57 AM
https://www.tastytrade.com/tt/shows/the-skinny-on-options-data-science/episodes/hedging-a-large-account-w-spreadsheet-09-29-2016
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