I don't construct factor models or do any of the dirty work, i choose what signals to take from pairtrade finder and then manage the trade myself, the rok/wy trade has gone against me quite some atm, as ive discussed previously i added a correlation filter to my signals to make sure i only take trades on increasing correlation which rok & wy didn't have. position trading is my main game, pair trading is something ive branched into in the last several months, and there have been some qualitity insights in this thread from a few experts, so i'm constantly tweaking & adjusting my trading plan as I learn, the past couple of weeks have taught me a lot and how well risk management deals with the unknown.
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Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
garbageman
Guest
Quote from jonnysharp:
I don't construct factor models or do any of the dirty work, i choose what signals to take from pairtrade finder and then manage the trade myself, the rok/wy trade has gone against me quite some atm, as ive discussed previously i added a correlation filter to my signals to make sure i only take trades on increasing correlation which rok & wy didn't have. position trading is my main game, pair trading is something ive branched into in the last several months, and there have been some qualitity insights in this thread from a few experts, so i'm constantly tweaking & adjusting my trading plan as I learn, the past couple of weeks have taught me a lot and how well risk management deals with the unknown.
Can you post the formula/math behind your correlation indicator? Are you normalizing prices to returns, or just finding correlation between raw closing prices?
Quote from jonnysharp:
GGSAE, yes i realise. I'm playing the technicals on this one. Would be good if we both could profit, time will tell. What's your holding period?
Well shut my mouth looks like it panned out for you...I took my CnxMee off as it's come in a bit and look to get long again although the spread is clearly trending down so I would usually let it ride but i have some of that position in another pair. My timeframe depends on a number of factors but I'm not adverse to holding a small position size for the longer term if it's with the trend and fundamentals...just added some AciCnx long, maybe i bought it from you, haha.
Quote from garbageman:
Can you post the formula/math behind your correlation indicator? Are you normalizing prices to returns, or just finding correlation between raw closing prices?
Ive said this several times before and keep finding myself constantly repeating it, I don't construct the formula's or models or do any of the technical work, i use a program from www.pairtradefinder.com and take signals from that on a discretionary basis, please check with them how they calculate their formula's as I wouldn't have the slightest.
Closed one trade today for a profit;
Sold HNZ @ 51.38
Covered GIS @ 68.85
Sold HNZ @ 51.38
Covered GIS @ 68.85
Quote from jonnysharp:
yeah I don't think sudden & significant increases in volatility is good for open spreads because we are basing are calulations on past data when volatility was lower, however might be a good time to put on spreads. I'm finding pair trading to be very similar to selling premium. Also with turmoil in many markets hedge funds are being swamped with redemptions which means exiting positions across the board, including their statistical arbitrage trades at a loss hence increasing the divergence's currently occurring just like we had back in August last year when big funds were reporting 25 sigma events happening that were only suppose to happen once every 100,000 years. I think commodities coming off hard & fast caught a lot of funds off-guard which in turn lead to pressure on the IB's that were funding them, which created a halo effect and now we have wall street playing musical chairs except there's 1 chair for every 5 players and the music has stopped. Sell the rallies could be the mantra for a long time to come. Well that's my take on it anyway.
Exited one trade today for a profit;
Sold LOW @ 24.21
Covered HD @ 26.73
One new trade today;
Long BAX @ 66.42
Short GENZ @ 80.39
Open trades: 11
Wins: 15
Losses: 0
Great thread Johnnysharp... Curious if pairfinder also charts the pair spread as well in simple point difference.
Thanks
Nick
Curious if anyone noticed the response today to stat arb intraday?
Volatility at the open was followed by an immediate lull as everyone waited for the Bail Out decision and created low volatility but trending (downward) prices. Many of the intraday spreads I trade widened significantly and held until after the decision whereupon there were a number of opportunities.
Reminds me of something written on the downturn in stat arb during 01-03, theory was proposed that it was due to lack of institutional involvement and program/algo trading that caused spreads to widen and delayed reversion causing opportunity cost, perhaps today was a microcosm of that argument??
Volatility at the open was followed by an immediate lull as everyone waited for the Bail Out decision and created low volatility but trending (downward) prices. Many of the intraday spreads I trade widened significantly and held until after the decision whereupon there were a number of opportunities.
Reminds me of something written on the downturn in stat arb during 01-03, theory was proposed that it was due to lack of institutional involvement and program/algo trading that caused spreads to widen and delayed reversion causing opportunity cost, perhaps today was a microcosm of that argument??
Quote from gtgtgt3:
Just founds this thread. Very interesting!! I trade intraday pairs with The IPTS at www.daytradepairs.com The only downside is that you need Tradestation to run it.
HI gtgtgt3,
curious how daytradepairs has been working out for you...
Thanks
Nick
knocks, yes there have been some strange happenings in the pair trading world, these extraordinary events must be having an impact like you say, good opportunities for those who could identify them.
Nick, yes pairtrade finder has spread charts, however I don't use them.
Exited one trade today;
Sold HAL @ 30.29
Covered CNQ @ 64.10
One new trade today;
Long PHM @ 13.91
Short TOL @ 24.31
Nick, yes pairtrade finder has spread charts, however I don't use them.
Exited one trade today;
Sold HAL @ 30.29
Covered CNQ @ 64.10
One new trade today;
Long PHM @ 13.91
Short TOL @ 24.31