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Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
Quote from dukatu1:
Forgot to post this one.
I initiated it 2 days ago however I still think it's gonna rally 5% from today's price levels.
Enjoy.
S MA 223.00
B 10x MSFT 24.15
short <b>mastercard</b>, long <b>microsoft</b>? that's an unusual pair, what made you place this trade out of interest?
Hi Jonny
Glad to see you again. I was studying back test and I did not think PTF use correlation into consideration when doing back testing. I also think that RTM Pairs is not doing well with bullish market like now because the strong stocks that I short get stronger and my combos were stopped out often. What is your opinion.
Thanks
PA
Glad to see you again. I was studying back test and I did not think PTF use correlation into consideration when doing back testing. I also think that RTM Pairs is not doing well with bullish market like now because the strong stocks that I short get stronger and my combos were stopped out often. What is your opinion.
Thanks
PA
Today's trade:
B - EWT @13,3
S - EEM @45,6
looking for 3%
B - EWT @13,3
S - EEM @45,6
looking for 3%
An interesting article on the effect of Currency on Industry Peers. Applies to pair trading companies where one has global exposure, the other has little. From Investopedia.
Walt B
========================
The Impact of Currencies on Equities
There are many ways in which currencies can impact equities. For multinational companies, currency fluctuations can increase or reduce foreign earnings. For importers and exporters, exchange rates can impact profitability and sales. Let's take a look at how these relationships work. (For more insight, read What will happen to my stock portfolio if the greenback loses value?)
Relative Performance Between Industry Peers
Currency fluctuations can mean the outperformance or underperformance of industry competitors. Take Boeing (NYSE:BA) and France-based Airbus for example; they realized a divergence in profitability between 2006 and 2007 when the euro appreciated 20% against the U.S. dollar. Boeing, the U.S.-based airplane manufacturer, saw a sharp rise in orders for its Dreamliner jet. There was a notable shift in interest by foreign buyers once the euro rose from 1.18 to 1.42. Boeing's European competitor, Airbus, on the other hand, suffered greatly due to the strengthening euro. In the third quarter of 2007, Airbus announced that it would be cutting 10,000 jobs and accelerating production of a new superjumbo jet to reverse an $810 million loss.
Importers Versus Exporters
Currency strength or weakness can also mean the difference between one sector underperforming another. More specifically, when the U.S. dollar weakens, companies like Wal-Mart (NYSE:WMT), which imports most of its products, underperform companies like Boeing, which sells a lot of its jets abroad. In Figure 1, the orange line represents the dollar index while the blue line represents the price of Wal-Mart divided by the price of Boeing. As you can see, when the U.S. dollar weakens, Wal-Mart underperforms Boeing and when it strengthens, Wal-Mart outperforms Boeing. The reason for this is that a stronger greenback means that companies like Wal-Mart have greater buying power, making the cost of foreign goods less expensive.
http://www.investopedia.com/articles/forex/07/equities-currency.asp?partner=fxweekly10
Walt B
========================
The Impact of Currencies on Equities
There are many ways in which currencies can impact equities. For multinational companies, currency fluctuations can increase or reduce foreign earnings. For importers and exporters, exchange rates can impact profitability and sales. Let's take a look at how these relationships work. (For more insight, read What will happen to my stock portfolio if the greenback loses value?)
Relative Performance Between Industry Peers
Currency fluctuations can mean the outperformance or underperformance of industry competitors. Take Boeing (NYSE:BA) and France-based Airbus for example; they realized a divergence in profitability between 2006 and 2007 when the euro appreciated 20% against the U.S. dollar. Boeing, the U.S.-based airplane manufacturer, saw a sharp rise in orders for its Dreamliner jet. There was a notable shift in interest by foreign buyers once the euro rose from 1.18 to 1.42. Boeing's European competitor, Airbus, on the other hand, suffered greatly due to the strengthening euro. In the third quarter of 2007, Airbus announced that it would be cutting 10,000 jobs and accelerating production of a new superjumbo jet to reverse an $810 million loss.
Importers Versus Exporters
Currency strength or weakness can also mean the difference between one sector underperforming another. More specifically, when the U.S. dollar weakens, companies like Wal-Mart (NYSE:WMT), which imports most of its products, underperform companies like Boeing, which sells a lot of its jets abroad. In Figure 1, the orange line represents the dollar index while the blue line represents the price of Wal-Mart divided by the price of Boeing. As you can see, when the U.S. dollar weakens, Wal-Mart underperforms Boeing and when it strengthens, Wal-Mart outperforms Boeing. The reason for this is that a stronger greenback means that companies like Wal-Mart have greater buying power, making the cost of foreign goods less expensive.
http://www.investopedia.com/articles/forex/07/equities-currency.asp?partner=fxweekly10
Quote from jonnysharp:
short <b>mastercard</b>, long <b>microsoft</b>? that's an unusual pair, what made you place this trade out of interest?
MA was giving me couple of sell signals vs its closest peers, however lower ADFs and lower terurn potential.
MSFT was giving me BUY signals vs its closest peers, however lower ADFs and lower terurn potential.
MA is not too far from a tech company.
Very good ADF between the two during the last 6-9 months.
Positive on Net dividend basis, in case I have to hold this longer.
Hope it helps.