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Hi AAA, Pairs trading and long/short strategy are both hedging strategies. If you trade/invest primarily based on FA, then you have a long/short spread (long a stock with good fundamentals, short the stock with poor fundamentals). Pairs trading, on the other hand, is a form of statistical...

Hi all, I did open a position on 9/20/02 at the open R=1.104. So far it is a loosing trade. I decided to hold it over the weekend. The question is what do you do next? a) Do you hold it till it becomes a winner? If you do, do you add to your position? If you do, when? And how do you know if...

Hey Dave, I think the book is pretty good. It is written by professional HF managers. The perspective of a pro on pairs trading is hard to get these days. The models that hedge funds use are ether proprietary or cost a fortune. These guys kind of open up on a subject providing conceptual and...

Hey Royce, Exited FO/ITT today at the close R=0.786 with 5.87% profit. Not bad. Now will wait for reverse. Al

Hi Royce, I found this pair by calculating 2 year correlation and adding some strict parameters on 40DMA over 6 months. The book that I bought at Pairstrading.com helped a lot as well. I understand your concern about FO / ITT . One is a furniture business and the other one is a waste manager...

Hi Dave, I use end of the day data from TC2000 right now. It takes forever and it is all manual. I need an automatic source with real time data stream so I can try to attempt to build a daytrading system. Any thoughts? Here is a pair that I think is an ideal trading vehicle for 2-7 days...

ChrisM, I used ge/msft as a general example. Actually, the correlation between these 2 stocks is only 28% according to my calculations. The stock that correlates with GE the best is TMPW (87%). It is interesting that AOL correlates with GE @86%. If you run it on you machines, let me know if you...

Hi CHrisM, Correct. However, you are not interested in one particular correlation ex: ge/ msft. You trade 10, 20 at a time. One stops working, so you take a stop loss. The idea is that statistically you have higher chance of a profitable trade based on correlation. People at Pairstrading.com...

Hi WDGann, The ideal pairs trading system would incorporate some elements of the FA, especially the quantifiable ones. It would be much better for your good night sleep to be short a "bad" stock and "long" a good one. However, if you prioritize FA over TA and correlation, you end up with...

ChrisM, You are right, most of the correlations do not always work. What I am trying to do is to find a pair of stocks where the price ratio predictably oscillates around a certain moving average. I calculate 2 year correlation which tells me that if this pair of stocks behaved the same way for...

The ratio is 0.8244 at 14:22 today. AGN is a much better hedge/pair for MRK. The correlation over the past 2years is much higher. If you still want to trade MRK/LLY, I would suggest to wait for R=.8 or lower.

I have no problem with www.pairstrading.com so far. I continue to receive my updates daily. I use Qcharts to study the recommendations. This is the only affordable charting service that lets you plot the ratio(stock1/stock2) that I now of. I am trying to figure out their model. I know it is...

This is what I did so far: 1. Zurich Capital report on Market Neutral Hedgefunds - up to 120% annual return with very high Sharpe Ratio. Sounds good. The question is what kind of model do they use? Is it technical model based on correlation, or is it a fundamentals based long/short model? Any...

I have been lately introduced to pairs trading. It sound like it is a great strategy to trade uncertain bear market in a trading range. I am looking for resources to learn more and develop my own strategy/model. Please help!:confused: Thanks