The Powerful Edge of
Market Neutral Equity Pairs
www.PairTrader.com
Presented by: Don Bright
What is a Pair?
The combination of two stocks to profit
from their relative change in price through
divergence or convergence of the spread
price.
Statistical Arbitrage vs. Risk Arbitrage
Created for different purposes traded with
many different strategies
Creating a Spread Price to Watch
Example: Long Alcan vs. Short Alcoa
Differential
Last Price of AL minus Last Price of AA
48.06 – 30.58 = 17.48
• Factor
– (.65 x AL) – AA
(.65 x 48.06) – 30.58 = .66
• Ratio
Numerator and Denominator
AA divided by AL 30.58 / 48.06 = .64
Trading Considerations
Goal is Market Neutral
Choices are:
Dollar Neutral ($1 long to $1 short)
Beta Neutral (H.V is substitute)
Share Neutral
Best Pairs Created From:
Same Industry Group
Correlated
Exhibit Mean Reverting Tendencies
Why is there the probability of mean
reversion over time?
Fundamental Difference Between Stocks
Comparing Metrics is Straightforward
Overvalued / Undervalued to Peers
CnpSrp100
65-Day Chart
Metrics used in Fundamental
Comparisons
Value out performs growth when risk adjusted
Compare:
Market Cap
Price to Book (P/B)
Tangible Book Values
Price to Earnings (P/E use TTM)
Dividend Yield
Industry Group
Short the overvalued stock
Buy the undervalued stock
Spread History
Compoundable Trades
Predictability
Intra-day Scalps
Market Neutral Swing Trade
Relative Strength Pairs
Baskets
Pair Investing
Fundamental Edge
Technical Edge
PairNomics, LLC.
Traders Training Traders
A systematic, logical, low stress methodology to
making consistent money in Today’s Markets.
www.pairnomics.com
PairNomics, LLC announces the release of the most advanced, comprehensive 6-month course ever
developed for professional and active traders. This Correspondence Course was produced by a
group of successful traders, who combined years of experience to create a structured system and a
step-by-step disciplined journey into the realm of Equity Pairs Trading and related Market-Neutral
Strategies.
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Online Correspondence Course
Course Delivered by Utilizing the Latest in Multi-Media Training Technology
6-Month Course Structured in Weekly Modules
Systematic Compoundable Strategies
Learn How to Confidently Use Trading Probabilities to Maximize Profitability
All Traders MUST be PROFITABLE Before Advancing to the Next Module
Required Research, Assignments, Quizzes, Business Plans, and Trading Tasks
Learn to Combine Fundamentals & Technical Analysis
Additional Comprehensive Strategies & Techniques beyond Pairs Trading
Master Critical Risk-to-Reward Relationships
Course Includes Monthly LIVE Web Conferences
Receive PairNomics PairTrader Certification upon Completion of Course
“Go confidently in the direction of your dreams.
e-mail within 30-days for
Live the life you have imagined.”
Expo discount of 10%
– Henry David Thoreau
e-mail today !
info@pairnomics.com
Contact us for:
Mentoring & Education
Compoundable Profitable Strategies
Data, Tools & Resources
Automated Trading Programs
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www.PairTrader.com
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