February 2009
3 posts
Market Neutral Vs. Risk Free
Market-neutral strategy: A trading strategy that derives its returns from the relationship between the performance of its long position and the performance of its short positions, regardless of whether this relationship is done on the security or portfolio level.
In a perfectly market-neutral portfolio, holding all other factors constant, the performance of the long portfolio and the performance...
Duration and Data
One of the key challenges in pair spotting is the duration for analysis - how far back do you need to look out to extract pair behavior - finally it boils down to two things: identify the pair, and then look for divergence. We need to understand that without comprehensive tools that can identify divergence signals, we’ll end up ‘guessing pairs’ at some level, which is just...
Its the same thing...
Wanted to note this down before I forget.
One of the main reasons I got interested in Pairs trading is the fact that you are not taking a directional bet in the market, instead, you are taking a bet on the relative performance of two instruments - so basically, we are saying, from where we are now, instrument A will outperform instrument B, since historically they have behaved in a particular way...