Quote from bentedges:
Since fundamentals do matter, and TXN recently raised their guidance (even if the analysts don't believe it) I have exited the long INTC, short TXN trade at a small loss. Currently the position is down 1.0%.
The long RDC, short NFX is up 1.5%, and probably still has room to go, but I have taken the trade off. If the differential expands again, I will look to put the trade back on.
The long KNDL, short PRXL is up 13.1%. I still have the trade on, but continue to trade around the position. If it only gets back to -1.0 Std Dev, that would imply an additional $3 of upside in the differential. Note it should go from a 1:1 ratio to a 4:5 ratio now.
Two ideas that came to light that I put on Friday, both that are further than 2 Std Deviations from the mean and where the fundamentals support the trade:
Long MRX, short PMTI. MRX went out Friday at $15.70, PMTI at $17.54. A 1:1 ratio is what I am using. PMTI went up huge on the FDA approval for an over the counter laser partnered with Johnny John. Even if you take the most optimistic assumptions from analysts that it could add $40 mil in revenues in 2010, the disparity doesn't make sense.
In the 'big ugly' category (my faves to trade) a long in HNZ at $36.32 and short in CL at $71.38 looks appealing. I am using a 2:1 ratio and expect this trade to eventually yield $6 in the differential.
With that, I will stop posting my ideas and cluttering up johnny's thread 
The long MRX, short PMTI has been taken off the sheets. In 8 trading days the trade yielded $3.31 in the differential, or +9.96% in the capital employed. Does it have further to go? Probably...but given the relatively low correlation for 2 stocks in the same industry, I am comfortable with taking the gain and moving along.
The long HNZ, short CL is virtually flat. It would be down a bit over 0.5%, except that I was able to collect the $.42 dividend. I still have the trade on and think it works nicely. HNZ went out today at $35.34 and CL closed at $70.19.
Long KNDL, short PRXL has come all the way back in. It currently sits at -2.2 std deviations from the mean. Given the fundamentals, valuation, and growth profiles for the companies, this appears like it's time to up the size in the trade again. KNDL closed at $11.90 and PRXL went out at $13.15 today, giving us a differential of -$1.25. I did add back to the position today. Be aware both will be presenting at the Wachovia conference on Friday.
One that I may be a touch early on, but I like just because the fundamentals and valuation are so compelling for the former is a long in SUN, short in TSO. Currently at -1.5 std deviation. Normally I would volatility adjust this to be short more TSO against the SUN, but given this month's performance in TSO and it now sitting in an oversold condition, I am choosing to use a 1:1 ratio, which obviously gives me a long bias.
Lastly, I see the discussion on beta adjusting and couldn't agree more with those who have said beta is meaningless in pairs trading. Yes, I volatility adjust the pairs, but beta is measured against the S&P 500 and is worthless relative to what one is hoping to accomplish with their pairs trading. Beta is only useful in the context of a larger portfolio with many positions; as well as for opening only orders.
That's all I got...trade your pairs well, folks!
