Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
anyone wanna post or start a review thread for the software mentioned (pairtradefinder dot com)?
yobo, my closed trades show a nice profit and my open trades also show nice losses thanks to the recent turmoil, so my a/c is down 3.6%(closed & open p/l) since starting this journal which is a lot better than down 16% on the sp500. with lower volatility & exposure aswell, so you could say im outperforming the market averages significantly which is achieving my primary objective. I have noticed my current portfolio has a weakness bias to the market going down, something il have to investigate further to see if i can improve on.
trvl, id be happy to contribute to a review thread for pairtrade finder. i know there are a couple of other users on here aswell that im sure would add their opinons.
trvl, id be happy to contribute to a review thread for pairtrade finder. i know there are a couple of other users on here aswell that im sure would add their opinons.
"I have noticed my current portfolio has a weakness bias to the market going down, something il have to investigate further to see if i can improve on."
Hey johnnycash, love the name by the way, I think the bias you are seeing is because the market in general has been one sided and that is straight down. Given that the strategy you are pursuing, "mean reversion", implies profit taking when trends change, is the reason for your bias. I believe the reversion will not occur until the bias of the market changes. I would bet a billion bucks if I had it that you will see your pairs become profitable when the market decides to turn.
If you were pair trading and going with the direction of the spread, your bias would be opposite, but since you have been mean reverting and trying to time a turn, you are seeing the bias to the downside since the market hasn't turn.
Hope this makes sense.
gehko, could you please expand on beta weighting? sounds interesting.
yobo, yes that makes sense thanks, I think your theory may be right about my downside bias.
yobo, yes that makes sense thanks, I think your theory may be right about my downside bias.
Closed 1 trade today for good profit;
Sold CNX @ 37.21
Covered ACI @ 24.98
Opened 1 new trade;
Long GRS @ 6.23
Short EGO @ 6.02
Open trades: 9
Closed wins: 21
Closed losses: 5
Sold CNX @ 37.21
Covered ACI @ 24.98
Opened 1 new trade;
Long GRS @ 6.23
Short EGO @ 6.02
Open trades: 9
Closed wins: 21
Closed losses: 5
Johnny, as a fan of your thread, I want to ask you if you're convinced that Pairtrading is the way to go, or vice versa? I still pairtrade occasionally, but I try to keep it intraday.
In one of the posts, you quoted that you're down so far using this strategy. well, when I actively pairtraded, I was 39-0. and when it became 39-2, it pretty much wiped out all my gains. I reckon its the case with you.......running the losing pairs. it's also becoming harder now that tighter leverage is enforced on overnites. I hope you succeed as I'm looking for source of inspiration in pairtrading
Quote from forsalenyc:
Johnny, as a fan of your thread, I want to ask you if you're convinced that Pairtrading is the way to go, or vice versa? I still pairtrade occasionally, but I try to keep it intraday.
In one of the posts, you quoted that you're down so far using this strategy. well, when I actively pairtraded, I was 39-0. and when it became 39-2, it pretty much wiped out all my gains. I reckon its the case with you.......running the losing pairs. it's also becoming harder now that tighter leverage is enforced on overnites. I hope you succeed as I'm looking for source of inspiration in pairtrading
Yes im convinced that pair trading is a great method, in the last 6 weeks ive outperformed the SP500 by a whopping 22% with significantly less volatility and exposure in my portfolio than the index aswell. Most hedge funds are shutting down or showing heavy loss's so im quite happy to be only down 2.9% im sure Il end the year up once turmoil subsides. The VIX is at a historical high of 54 which is having temporary adverse effects on some strategies, I have no doubt the VIX will return to more normal levels over coming weeks.
Example: You have a basket of pairs that cover multiple sectors and you wanted to hedge your portfolio risk for possible economic news that is coming out pre-market.
Possible Solution: Beta weight your portfolio against the SPY'ders such that going into the close you would be delta neutral. In other words you are offsetting the risk of your overnight positions for a lower return (positive or negative).
Caveat: There commissions associated with maintaining a delta neutral portfolio so be careful not to eat away your profits with constant or unwarranted readjustments.