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Discover what Hedge Funds, Institutions, and many shrewd Investors have known for years—pairs offer a nearly perfect investment vehicle. It used to be difficult to find and trade pairs, but now there’s PairTrader! From generating correlated pairs, to analyzing them, to trading the result—PairTrader offers it all.
The PairTrader Module empowers you to:
- Automatically Build Correlated Pairs
- Generate Signals on Pairs
- Trade the Pairs in OmniTrader
We all know that securities in the same group tend to move together, but frequently some of these related stocks temporarily separate, only to come back into line a short time later.
The idea of pair trading is to profit from this temporary imbalance between the two related securities. It can be two Oil stocks, two Industrial Equipment stocks, etc. or any two correlated instruments. Once the pair is established, we simply look for deviations from that relationship, then profit from the imbalance.
Using Pair Trading, we profit from a temporary imbalance between two related instruments.
To set up the pair trade, we buy one of the correlated instruments while simultaneously shorting the other. This setup allows us to profit from relative price movements between the two with significantly reduced exposure to other market risks. The example to the right illustrates this concept using the stocks.
Many stocks and futures have the highly correlated movement that provides outstanding pair trading opportunities. The problem was that, up until now, it was incredibly difficult to identify the profitable pairs from the sea of possible combinations.
PairTrader has changed all that!
The chart on top shows the price charts for Boston Properties (BXP) and Vornado Realty (VNO). You can see how well these two stocks move together, providing us with a great pair. Below that is the pairs spread chart (BXP-VNO), which is basically a plot of the price difference between the two stocks. The spread chart shows that through July and August, the two stocks moved in a similar manner which creates a tight spread. However, in late September BXP began to fall while VNO held its ground. This move causes the spread to widen, and presents us with a good pair trade opportunity.
In order to take advantage of this move, we buy the pair. In this case, that means we buy BXP and sell VNO. After the trade is taken, BXP began to move up rapidly while VNO stayed relatively fl at. A week later, we exit the trade. The short on VNO resulted in a small loss, but the gain we made on the long for BXP far exceeds VNO’s loss, and we profit t from the pair falling back in sync with each other.
The Power of Pair Trading Seminar
Because pair trading involves trading two securities at the same time, it has up to now not been very accessible to most investors. This seminar takes you through the basic concepts of pair trading, introduces you to the PairTrader software, and shows you how to use this module to create and trade pairs easily! Whether you are new to pair trading, or if you are a seasoned veteran, this seminar will show how to use PairTrader to generate consistent profits with reduced market risk.
- The Advantage of Market Neutral Trading
- How a Pair Trade is Constructed
- How to Find the BEST Pairs to Trade
- Testing Pair Trades with OmniTrader
- How to Engage the Market with PairTrader
- Pairs on Futures
- and much more!