timwest

Long SPY, Short EEM PAIRS TRADE

BATS:EEM   iShares MSCI Emerging Index Fund
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It looks to me that the S&P500 is leading the Emerging Markets Index, setting up a disparity that could be resolved in any number of ways:

1. The S&P could rally and the EEM could rally less.
2. The S&P could continue to fall, and the EEM could fall more.
3. The S&P could stabilize, and the EEM could slide lower.

The risk isn't very high in this pair, but keep the risk to 3% and the upside is approximately 5%. You can see that they are 3.6% apart in performance since June ( EEM +8.48% - SPY +4.81% = 8.4-4.8 = 3.6)



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