Pairs Trading ??? any new inputs ?

rajivkhatlawala · #1 4th February 2008, 06:11 PM

Dear Friends,

I wanted to know whether there are any other input / view on 'Pair trading' strategy - (other than tracking deviation in correlation and initiating trades)

I am testing one different view on pair trading -

CA Rajiv D Khatlawala
(Author: "How to profit from technical analysis" Published by Vision books)

CreditViolet · #2 4th February 2008, 06:56 PM

Quote:

Originally Posted by rajivkhatlawala

I am testing one different view on pair trading -

........
Which is?

kkseal · #3 4th February 2008, 07:32 PM

First things first What exactly is meant by this pair trading strategy - is it the 'go-long-on-steel-short-autos' or 'go-long/short-on-realty-AND-banks/autos' type?

Regards,
Kalyan.

kkseal · #4 4th February 2008, 08:35 PM

Oh Sorry Think you were referring to Forex.

oxusmorouz · #5 4th February 2008, 08:43 PM

Quote:

Originally Posted by kkseal

Oh Sorry Think you were referring to Forex.

Very unlikely. He talks about correlations, suggesting the fact that he means "spreads" or "ratios" between stock prices.

oxusmorouz · #6 4th February 2008, 08:48 PM

Quote:

Originally Posted by rajivkhatlawala

I am testing one different view on pair trading

Hello,
What sort of testing and how?

sattimes · #7 4th February 2008, 09:05 PM

Quote:

Originally Posted by kkseal

First things first What exactly is meant by this pair trading strategy - is it the 'go-long-on-steel-short-autos' or 'go-long/short-on-realty-AND-banks/autos' type?

Regards,
Kalyan.

Kalyan sir ,

u are right, but not in different sector. It is normally it is done within the same sector.

Good example is HDFC and HDFC bank.

Since both have some what same nature of operation, one can be shorted and other long.

the one which is outperforming is shorted and in other one long position is taken.

U can gain both way if u shorted comes down and the one u long moves up.

Risk is that if the one u are short continues to outperform and other underperform

This statergy also involves hedging as u are taking opposit positions.

regads
Satish

CreditViolet · #8 4th February 2008, 09:29 PM

Quote:

Originally Posted by kkseal

First things first What exactly is meant by this pair trading strategy - is it the 'go-long-on-steel-short-autos' or 'go-long/short-on-realty-AND-banks/autos' type?

Regards,
Kalyan.

http://www.pairtrader.com/index.php

http://en.wikipedia.org/wiki/D._E._Shaw_&_Co.

kkseal · #9 4th February 2008, 10:17 PM

Quote:

Originally Posted by oxusmorouz

Very unlikely. He talks about correlations, suggesting the fact that he means "spreads" or "ratios" between stock prices.

Oxy, he could've meant the correlation (& mean deviation) between 2 currency pairs. Also his posts are mostly in Forex threads.

Regards,
Kalyan.

kkseal · #10 4th February 2008, 10:20 PM

Quote:

Originally Posted by sattimes

Kalyan sir ,

u are right, but not in different sector. It is normally it is done within the same sector.

Good example is HDFC and HDFC bank.

Since both have some what same nature of operation, one can be shorted and other long.

the one which is outperforming is shorted and in other one long position is taken.

U can gain both way if u shorted comes down and the one u long moves up.

Risk is that if the one u are short continues to outperform and other underperform

This statergy also involves hedging as u are taking opposit positions.

Thanks Sat Understood. And no 'sir' please.

Regards,
Kalyan.