Pair Trading Strategy Journal

Quote from jonnysharp:

...they added that new feature a few days ago... its basically charting the current standard deviations from the mean, pretty handy to see current divergences against historical ones...
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Geez, did they take the idea from my chart? :cool:
 

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Quote from NevouS:

IMO pair trading comparing unrelated stock, or almost any stock, seems too much effort very little reward, somewhat gimmicky. I'd rather see stock divergence compared to an ETF or underlying index opposed to another stock. But I'll observe these trades nevertheless.
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Just more risk and more reward if you play in the high vol deals. But you can get slaughtered on one deal if you dont have good money management.
 

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Quote from jonnysharp:

I don't see how trading a stock against another stock is more work than a stock against a ETF, and according to numerous backtests ive done, stock vs stock pairs are significantly more profitable than stock vs ETF or ETF vs ETF pairs.
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Here is my rationality. Why should two random stock, with some sort of divergence flag, follow thru and meet expectations?

Opposed to IBM under performing GE (forgetting about news sensitivity) and using divergance this way because they are linked to the DJIA and once there is a flag for IBM, then IBM should play catch up.

I just see picking two random stocks do not give a trading edge unless they are related by index or industry at the least.

Some people really scorn pair trading while others praise the @#$% out of it but this thread should shine some light hopefully in either case.
 
Quote from saico:

Johnny,

updating to the new version scrambled my value adjustments a bit. What value do you have for ''Volatility Standart Deviation Lookback'', please?

Much thanks in advance!
saico
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Quote from NevouS:

Here is my rationality. Why should two random stock, with some sort of divergence flag, follow thru and meet expectations?

Opposed to IBM under performing GE (forgetting about news sensitivity) and using divergance this way because they are linked to the DJIA and once there is a flag for IBM, then IBM should play catch up.

I just see picking two random stocks do not give a trading edge unless they are related by index or industry at the least.

Some people really scorn pair trading while others praise the @#$% out of it but this thread should shine some light hopefully in either case.
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Who said anything about pair trading random stocks? as stated numerous times all throughout this journal we only trade pairs where both stocks are in the same industry.
 
Quote from jonnysharp:

Who said anything about pair trading random stocks? as stated numerous times all throughout this journal we only trade pairs where both stocks are in the same industry.
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...and have a proven and backtested high correlation.
 
If any one knows then please tell me
about the ration used in Pair trade.
u can hv the data sheet when u run "back tester" and click option "View data"after selecting a pair.
there is a colam of Ratio i realy want to know about it.
if any one knows reply me as early as possible

also i hv attached sheet please go through it.
 

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