Pairs trading

[ullastp]

Pair Trading is the only strategy that will work in these market conditions. Here’s my pair trade for the day

SELL 4 Lot SBIN JAN FUT @ 2484.00 (4*125*2484.00)
BUY 5 Lot VIJAYABANK FUT @ 62.20 (5*4000*62.20)
Though it looks like one stock is High Market Cap & other a Low Market Cap, the truth is, this is the only consistent “Pair” in the banking sector for the last 1 year.

That is.; this pair is highly correlated and an absolute co-integrated one.
The current Spread (divergence) in this pair is +9.00% in favour of SBIN. So VIJAYABANK should outperform SBIN by around 9% (or at least 5%) in coming 1 month.

 

[viharpatel]

Pair Trading is the only strategy that will work in these market conditions. Heres my pair trade for the day

SELL 4 Lot SBIN JAN FUT @ 2484.00 (4*125*2484.00)
BUY 5 Lot VIJAYABANK FUT @ 62.20 (5*4000*62.20)
Though it looks like one stock is High Market Cap & other a Low Market Cap, the truth is, this is the only consistent Pair in the banking sector for the last 1 year.

That is.; this pair is highly correlated and an absolute co-integrated one.
The current Spread (divergence) in this pair is +9.00% in favour of SBIN. So VIJAYABANK should outperform SBIN by around 9% (or at least 5%) in coming 1 month.

nice friend. i am glad to find someone who following pair trading.
my chat id is vihar2004
please add me and lets share some more information here so we can understand this more easily.

 

[manishchan]

Pair Trading is the only strategy that will work in these market conditions. Heres my pair trade for the day

SELL 4 Lot SBIN JAN FUT @ 2484.00 (4*125*2484.00)
BUY 5 Lot VIJAYABANK FUT @ 62.20 (5*4000*62.20)
Though it looks like one stock is High Market Cap & other a Low Market Cap, the truth is, this is the only consistent Pair in the banking sector for the last 1 year.

That is.; this pair is highly correlated and an absolute co-integrated one.
The current Spread (divergence) in this pair is +9.00% in favour of SBIN. So VIJAYABANK should outperform SBIN by around 9% (or at least 5%) in coming 1 month.

I also fall in this category .. Started actual trading a year ago.. lost money.. won money and lost again.. so now onto the paper trading strictly till I get good hang of it..

 

[pankajpari]

Pair Trading is the only strategy that will work in these market conditions. Heres my pair trade for the day

SELL 4 Lot SBIN JAN FUT @ 2484.00 (4*125*2484.00)
BUY 5 Lot VIJAYABANK FUT @ 62.20 (5*4000*62.20)
Though it looks like one stock is High Market Cap & other a Low Market Cap, the truth is, this is the only consistent Pair in the banking sector for the last 1 year.

That is.; this pair is highly correlated and an absolute co-integrated one.
The current Spread (divergence) in this pair is +9.00% in favour of SBIN. So VIJAYABANK should outperform SBIN by around 9% (or at least 5%) in coming 1 month.

Hi ullastp,
Can you share some more info on your strategy. Do you use any software like PairTradeFinder, etc. or have developed your own app for the same.

Regards,

Pankaj

 

[ullastp]

Hi Guys,

I'm not using any Trading Software as I can't bear the software cost.

First i'm checking each sector and find the correlation of price. But price correlation won't tell everything. So i go for co-integration.

For that calculation I'm using one Statistical software called "R". This is a very good software if u know some statistical concepts. We have to write program to find out whether the pair is cointegrated (or statistically speaking the spread is stationary or not).

Then i'm checking the Return correlation. If all the above 3 are ok then i check the comparitive graph of the two stocks. Based on that i will decide whether go for short term or long term.

Again u can add/check some fundamentals & Technicals of the stocks with it.

If all are OK, why to wait....Enter the trade

As far as my experience it will give a decent profit.
(As we are investing in individual stocks definitely there will be cases like stoploss hitting, but if u r looking overall, it will be a good net profit)

Happy Pairs Trading!!!!:thumb:

 

[PartTime_Trader]

Download link for 'R' Software:
http://www.r-project.org/

Download Link for Pair Trading Package:
http://www.r-bloggers.com/pair-trading-strategy-how-to-use-pairtrading-package/

 

[smjaisree]

hi Ullastp!
very useful info..could you share some more details? like, how to find cointegration and mean reversion?
thanks in advance..

 

[omshah18]

Most of traders use trading software with comparative graph...it's great one for trading..

 

[ethan hunt]

Most of traders use trading software with comparative graph...it's great one for trading..

Examples / Charts etc will be appreciated,
Thanks

 

[toingpoing]

Hi Guys,

I'm not using any Trading Software as I can't bear the software cost.

First i'm checking each sector and find the correlation of price. But price correlation won't tell everything. So i go for co-integration.

For that calculation I'm using one Statistical software called "R". This is a very good software if u know some statistical concepts. We have to write program to find out whether the pair is cointegrated (or statistically speaking the spread is stationary or not).

Then i'm checking the Return correlation. If all the above 3 are ok then i check the comparitive graph of the two stocks. Based on that i will decide whether go for short term or long term.



Again u can add/check some fundamentals & Technicals of the stocks with it.

If all are OK, why to wait....Enter the trade

As far as my experience it will give a decent profit.
(As we are investing in individual stocks definitely there will be cases like stoploss hitting, but if u r looking overall, it will be a good net profit)

Happy Pairs Trading!!!!:thumb:

Try Calander Spread strategy for the same stock.. Calculate the exact levels for each month seperately..You can never go wrong.No need for SL. Only thing is you should also master the exit and re entry..:thumb: