I promised myself I would also focus on a market neutral strategy. Yesterday (Pre-Market, Monday 10-May) I add 1 idea to my report: Long Standard Bank ( SBK
)/Short Investec ( INL
). As of 2pm on Tuesday afternoon, the pair was higher by 4.84% over the 2-day period vs -1.6% for the All Share Index for the same period. It closed +4.33%.
Market neutral strategies are used by traders to reduce risk while simultaneously attempting to generate alpha. To achieve this, traders make use of pairs trades which involves matching a long position with a short position in two stocks with a high correlation.
I'll continue to monitor for opportunities in this strategy.