Top Pair Stocks for Pair Trading

[rkkarnani]

You asked how I use options with pair. A small example
Lets say there is Long ICICI and Short Bank Nifty Signal. I will decide which has more probability. If i feel ICICI going up is more probable than banknifty falling, then I would buy ICICI fut and buy bank nifty put. I will replace the doubtful leg with option. So when ICICI goes up by 5% and bank nifty goes up by 2%, I would have made better profit then shorting bank nifty fut. On the other hand by buying put i am reducing my risk in one leg.

If I am in this position
I would buy ICICI Fut and Sell ICICI High strike
and buy one Bank Nifty Put
when using options the overall risk definitely gets reduced.

PTP, How do we avoid this thing : "To personally decide the probability" !! We need to base it on something other than the gut feeling! On some parameters !

Must add that you have done a lot of hard work in putting up the pair trade website! I feel its one of a kind in Indian Market scenario! There are websites catering to US and other markets for pair trading but not for Indian mkt scenario. Trust you will strive to improve the same with inputs from people like Smart_Trade and others here on TJ !

 

[Inthemaking]

i've been visitng this site since the day it was posted . been following the indications which were on the website watchlist . its very impressive , the kind of trading which was used in 1980's by j.p.morgan .
i also took up a trade hdfc bank vs nifty and profited by it . over all i find this site to be pretty impressive and definitely an addition to my trading arsenal .

Keep up the good work ,
looking forward for the improvement and new feature on the website ,

Inthemaking

 

[rkkarnani]

Kindly take out time to discuss my Post of 15th June above !

 

[mastermind007]

So fair in last 2 years of pair trading, these have been my top 4 favorites. I have also added the backtest results.

HDFC vs HDFC Bank - 35/35 Winners - Biggest Hit - All time favorite
Colpal vs Dabur - 18/18 Winners
DR Reddy vs Lupin - 20/21 Winners
Gail vs Ongc - 32/33 Winners - nowadays lot of oil related news so i avoid

Do you know better profitable pairs?

pairtradepro.

Are you just a subscriber to the pairtradepro.com website or are you the creator/the big Kahuna of that website?
I had visited the website sometime before I had seen this thread and had been unable to figure out what was to be shorted and what was longed. This thread did clear that doubt

Still, just to confirm and be 100% sure,
if a pair is listed as A vs B with + SD, we have to go SHORT on A and go LONG on B.
if a pair is listed as B vs A with - SD, we have to go SHORT on A and go LONG on B.

Have I correctly understood this?

Also, I did not quite follow your comments on trading bank nifty puts and all that. I will certainly read thru the thread again. In the meantime, if you can post a better example, it will be of great benefit to everyone.

 

[rkkarnani]

pairtradepro.

Are you just a subscriber to the pairtradepro.com website or are you the creator/the big Kahuna of that website?
I had visited the website sometime before I had seen this thread and had been unable to figure out what was to be shorted and what was longed. This thread did clear that doubt

Still, just to confirm and be 100% sure,
if a pair is listed as A vs B with + SD, we have to go SHORT on A and go LONG on B.
if a pair is listed as B vs A with - SD, we have to go SHORT on A and go LONG on B.

Have I correctly understood this?

Also, I did not quite follow your comments on trading bank nifty puts and all that. I will certainly read thru the thread again. In the meantime, if you can post a better example, it will be of great benefit to everyone.

Thanks for this Post, seems as if you were reading my mind too while posting this query ! Had the same doubts. I think there was some anomaly in the Scanner on the site which has been rectified now.
He indeed is the 'owner' of the site. You can chat with him there "Live" !

I strongly feel that he should give faster response to the queries Posted here as that would help him in marketing his Website better! :thumb:

 

[pairtradepro]

Thanks for the nice words. I will keep posting more about pair trading regularly in this thread. I am gaining good traction from traderji. Though many don't post replies here they come to the site after reading this thread.

 

[mastermind007]

I took the test drive of the website with one of my favorite scrips ASHOKLEY. It was paired by the site with TATAMOTORS. Instead of default quantity of 1, I decided to use the actual lot size of stocks in F&O and the end-result staring back at me is 65925 in net losses. If you add up four numbers highlighted in yellow, you will see the net losses.

I use - sign when I buy something (since I have paid) and use + sign when I sell. With this approach, in total column, I simply use Excel's SUM function. Since this is F&O trade, I've also cobbled together the MTM column that will appear in contract notes

 

[rkkarnani]

Thanks for the nice words. I will keep posting more about pair trading regularly in this thread. I am gaining good traction from traderji. Though many don't post replies here they come to the site after reading this thread.

Please attend the queries posted here by a few of us! The Posts in this thread would dry up fast if you dont respond quickly !
The example of Tata Motors and Ashok Leyland posted by Mastermind007 needs your attention. It was suggested the scanner on your Site to Long TataMotors and Short Ashok Leyland on 8th July Tata Motor was moving down and Ashok Leyland was moving up and it so happened that they continued in the same direction increasing the spread between the two !
So my question is : How is it calculated that a Stock is Oversold or Overbought? By which indicator? Is it RSI alone or something else?
Mainly would like to know :How is the Std. Deviation calculated between two Stocks. You can refer me to some link where I can read about it.
Thanks.

 

[pairtradepro]

I took the test drive of the website with one of my favorite scrips ASHOKLEY. It was paired by the site with TATAMOTORS. Instead of default quantity of 1, I decided to use the actual lot size of stocks in F&O and the end-result staring back at me is 65925 in net losses. If you add up four numbers highlighted in yellow, you will see the net losses.

I use - sign when I buy something (since I have paid) and use + sign when I sell. With this approach, in total column, I simply use Excel's SUM function. Since this is F&O trade, I've also cobbled together the MTM column that will appear in contract notes

Why do u need to wait so long, you can use Stoploss and exit. If you had used 0.5SD deviation you could have exited within few days. You can measure performance based on a single pair. Anyone who had gone long in tatamotors in last 1 month would have burnt fingers.

 

[pairtradepro]

Please attend the queries posted here by a few of us! The Posts in this thread would dry up fast if you dont respond quickly !
The example of Tata Motors and Ashok Leyland posted by Mastermind007 needs your attention. It was suggested the scanner on your Site to Long TataMotors and Short Ashok Leyland on 8th July Tata Motor was moving down and Ashok Leyland was moving up and it so happened that they continued in the same direction increasing the spread between the two !
So my question is : How is it calculated that a Stock is Oversold or Overbought? By which indicator? Is it RSI alone or something else?
Mainly would like to know :How is the Std. Deviation calculated between two Stocks. You can refer me to some link where I can read about it.
Thanks.

In Last 2 Weeks, MACD, RSI, AD INDICATOR, CCI, Willilams all have given buy signal in Tatamotors, but tatamotors has performed very badly, so from here on all these technical indicators can be termed as useless? I don't understand what sort of analysis is this. For any trade u need to have either a deviation wise stop loss or a percentage wise exit.