Pair Trading Strategy Journal

[cipherscribe]

Quote from magon:

Hello Guys, I have been trading pairs for awhile, with a return in over 1.5 year of 54%. I'm puting them at the virtual trading on WEALTHLAB, (PAIRS-ARB)
www.wealth-lab.com/Community/VirtualTrading/Rankings.aspx

I'm using pairtrading finder software but them I use resistence and support for the candidates, This week I have two picks but still undecided wich one to use: TIN:VCP and MR:ACL

Regarding a program that automatic can close a pair when a target have been optained, I believe it can be setup with http://traderxl.com/ withan account at TD-Ameritrade

I started trading pairs on the 1st May and am ontrack for a 50% annualised return. However my PF is hanging below 2 at the moment, and i'm not really happy with some of my picks.

I have started looking at alternate criteria, and will monitor results going forward. I am not going to take trades (as per my post above) that provide a profit opportunity of less than 5%.

ACL/MR came up on my radar on Friday, but it did not offer the same profit potential as MR/RMD - a trade I entered that has a profit potential of 5.6%

Adrian

 

[Magnas]

Hello all,

Thank you for very inspiring posts.

I am new to pair trading, but would like to focus energy this way as I found this topic quite challenging.

I would like analyze pairs in Excel. Could anyone please help me how to calculate and graph standard deviation from mean in Excel? (I understand from the graphs here that it is what PF calls Plus/Minus graph). I will appreciate any help as I am really stuck here...

I am including my sample Excel with one “demo” pair. I have calculate Ratio and Mean there. Anyone can please help me with coding calculation of standard deviation from mean?

Thank you. Magnas.

 

[tradingtrading]

=stdev(a1:a2) etc

whereby a1:a2 just reflects the mean data over the period that you want it. So for 14 day mean it might be

=stdev(a1:a14)

etc

 

[magon]

Quote from cipherscribe:

I started trading pairs on the 1st May and am ontrack for a 50% annualised return. However my PF is hanging below 2 at the moment, and i'm not really happy with some of my picks.

I have started looking at alternate criteria, and will monitor results going forward. I am not going to take trades (as per my post above) that provide a profit opportunity of less than 5%.

ACL/MR came up on my radar on Friday, but it did not offer the same profit potential as MR/RMD - a trade I entered that has a profit potential of 5.6%

Adrian

Adrian, I like more MR/RMD because this combination has a RSI very close to 30 (Oversold) RMD and ACL both are under a resistance level (it looks like ACL went throuth it today)

 

[magon]

Quote from magon:

Adrian, I like more MR/RMD because this combination has a RSI very close to 30 (Oversold) RMD and ACL both are under a resistance level (it looks like ACL went throuth it today)

I agree that MR/RMD has a higher % return if every thing goes in our direction

 

[tradingtrading]

Quote from sysre:

I just put together a pair system that makes around 18% per year (unleveraged).

sysre,

You can see some of my backtested data previously on the thread. I'm interested in your results and specifically over what time period you have tested your system.

For example, how did it perform in low volatilty periods and what did you note about how it performed over different market conditions etc

 

[0008]

is there any margin reduction for pari trading stocks?

If I buy 100 QQQQ and short 100 SPY, what is the margin required?

 

[R1234]

Quote from tradingtrading:

sysre,

You can see some of my backtested data previously on the thread. I'm interested in your results and specifically over what time period you have tested your system.

For example, how did it perform in low volatilty periods and what did you note about how it performed over different market conditions etc

This is the equity curve of the pair strategy I backtested. It assumes MOC with 1/2 cent commission per share. It consists of 25 pairs, most of which I got from this thread.

The backtest is, of course, cherry picked - I only chose pairs that had consistent equity curves over the backtest period.

I guess when I go live I'll be dropping out pairs if the equity curve of that pair turns down (maybe 2 stdev below the regression line of the equity curve). And adding pairs in a similar fashion.

 

[neospecialist]

Quote from magon:

I agree that MR/RMD has a higher % return if every thing goes in our direction

I am curious as to what charting software was used to run the studies on attached spread history?

 

[bentedges]

Quote from bentedges:

Quick follow-up to my post on 9/17. This appears to be a decent area to take gains in PEP/KO and COP/CVX. DE/CAT hasn't done much and should be looking for an exit before they report earnings. WYE/PFE convergence continues and that should narrow further now that we are likely getting close to the deal closing. Same applies to SGP/MRK.

One that appears attractive at current levels is long CVS, short WAG.

Per my post on the 5th, today looks like a good day to exit at least some of the CVS/WAG.

Been doing some work on forward testing pairs using ETF's against stocks and the results look somewhat promising. Not a lot of homeruns, but very few big blow-ups, either. Using a smaller std deviation than I do traditionally.

Trade 'em well, pair gang.