Pairs Trading UK & US Stocks Journal

This is a discussion on Pairs Trading UK & US Stocks Journal within the Trading Journals forums, part of the Reception category; JGH, yes you can either load the cash indices or ETFs as lado suggests, you can trade the emini's with ...

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Old Feb 24, 2009, 8:08am   #57
 
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stocktrader77 started this thread JGH, yes you can either load the cash indices or ETFs as lado suggests, you can trade the emini's with the indices signals but I wouldn't even bother, theres heaps of really good stock pairs out there. No your not hijacking the thread lado, I want this journal to be a place to share and learn for all of us, just because Im a experienced trader doesn't mean I can't learn anything from someone just starting out, a lot of my ideas have been induced by someone else's thoughts and opinions, so they are always welcome.

Placed 1 trade on Monday in the US residental property industry

Long Entry EQR - 18.47

Short Entry ESS - 53.16
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Old Feb 24, 2009, 10:33am   #58
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Thanks Lado and Stocktrader. I was envisaging spreadbetting indices such as DAX / FTSE100 (or, strictly, their cash futures) rather than trading ETFs that are based on them - unless you recommend otherwise. I'm also looking at pairs such as gold / silver, which are very much out of kilter at present - again, ideally spreadbetting rather than using ETFs.

I guess if the software doesn't look at commodities then one could use certain ETFs as a very good proxy for them.

Last edited by JGH03; Feb 24, 2009 at 10:58am.
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Old Feb 24, 2009, 11:51am   #59
 
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Thanks Lado and Stocktrader. I was envisaging spreadbetting indices such as DAX / FTSE100 (or, strictly, their cash futures) rather than trading ETFs that are based on them - unless you recommend otherwise. I'm also looking at pairs such as gold / silver, which are very much out of kilter at present - again, ideally spreadbetting rather than using ETFs.

I guess if the software doesn't look at commodities then one could use certain ETFs as a very good proxy for them.
interesting idea, but if you think that a universe of about 12,000 stocks is providing only a few opportunities a day, there may be little chance that a few indices / commodities through up any opportunities. Worth a look though....

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Old Feb 24, 2009, 11:59am   #60
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LOL ! It isn't that there are insufficient opportunities among the shares - rather that I had already been thinking of opportunities in certain indices and commodities and was interested to know whether the software evaluates these.
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Old Feb 24, 2009, 12:18pm   #61
 
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LOL ! It isn't that there are insufficient opportunities among the shares - rather that I had already been thinking of opportunities in certain indices and commodities and was interested to know whether the software evaluates these.
I wasn't being "funny", really. I just doubt that there'll be many opportunities here. Especially when you consider the number of traders following the main movers, quickly removing any price discrepencies. As I say, it's worth a look, so good luck

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Old Feb 24, 2009, 11:57pm   #62
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S77:

When backtesting pairs in PTF to find suitable pairs to follow, is there an unwritten rule regarding the minimum correlation in the past 365 days that is acceptable in order to reduce the risk of a pair diverging? For example, if a pair has had a correlation greater than 90% for the past 3 months but had a correlation of 10% 9 months ago, is that an acceptable pair?

Also, is there a preferable range for the ratio? I know that a good pair is one for which the ratio has been trading sideways. Many pairs have ratios that are trending up or down. Do you look for a particular range (high ratio/low ratio)?

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Old Feb 25, 2009, 4:24am   #63
 
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S77:

When backtesting pairs in PTF to find suitable pairs to follow, is there an unwritten rule regarding the minimum correlation in the past 365 days that is acceptable in order to reduce the risk of a pair diverging? For example, if a pair has had a correlation greater than 90% for the past 3 months but had a correlation of 10% 9 months ago, is that an acceptable pair?

Also, is there a preferable range for the ratio? I know that a good pair is one for which the ratio has been trading sideways. Many pairs have ratios that are trending up or down. Do you look for a particular range (high ratio/low ratio)?

Lado
Generally you want to stick to pairs that have an 1 year avg correlation of 80% or higher, if a pair has a had poor daily correlation readings in the past that is ok, it may have been a news event that affected prices for awhile. Yes for the ratio chart, I like to see regular and consistent oscillations around the mean, doesn't have to be a particular % range, try and pick ratio charts that look like a hearbeat monitor, don't trade strongly trending ratio charts.
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