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What is Cash Neutral? Cash Neutrality is expressed in terms of percentage of cash flow required in comparison to the second symbol. When trading a pair we need to ensure that the pair is Cash Neutral How to calculate Cash Neutrality? Calculation Price1 x lot size ——————— Price2 x lot size Eg: KOTAKBANK-HDFCBANK KOTAKBANK- Lot […]
Pair Trade takes advantage of the deviation in valuation of stocks due to the dynamic nature of the market. Key to spreading the risk is an assumption that the pair will have similar business idea as in the past during the holding period of the stock and will return to historic average levels. The concept […]
The pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy. The pair trading was pioneered by Gerry Bamberger and later led by Nunzio Tartaglia’s quantitative group at […]
Certain Terms/Abbreviations are used in Pair Trading. Find below some of the important terms used on this site. Price Ratio (PR) Price Ratio is calculated by dividing the price of the first stock by the second. Mostly by High value stock by Low value stock Example: KOTAKBANK-HDFCBANK pair PR = HDFCBANK / KOTAKBANK 1394.05/804.7 = 1.7324 […]
