Algokid

PAIR TRADE ( ONLINE RETAILER)

NASDAQ:EBAY   EBAY INC
254 3 0
CORRELATION : 93 %

CO INTEGRATION : 0.84

SHORT EBAY             (BLIUE)
LONG AMZN             ( ORANGE)
closing this trading with a profit on AMZN , and a small loss on EBAY, for a total net profit :)
Reply
The volatility of AMZN is far greater than EBAY. Try looking at a longer term time horizon and see that they aren't as closely correlated. The valuations are far apart too, in terms of standard valuation metrics. I'm thrilled that you are doing great work to bring up trades that take away "market risk" and I hope you are open to my comments. It is important that two stocks don't get too far apart from one another on a 6 month and 12 month basis. What I mean is 20% or so apart is about the max you want to see or else you are really just taking on pure, unhedged market risk, which isn't the point of what this methodology is all about, at least in my opinion. I just want people to have a good experience with pairs trading. For example, PEP and KO are pretty interesting most of the time and set up trades several times a year. Here's to lower-risk, steadier profits for all of us! Cheers. Tim
Reply
Hi Tim
I I've been pair trading for about 1 year and a half now, and I'm still learning. I really appreciate your input , it has helped me a lot in my research. In fact , not trading pairs with 20% + over 5 months period is one of my criteria now. Please feel free to add more suggestions. I'm here to learn . Thanks
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