The Powerful Edge of Market Neutral Equity Pairs Presented by: Don Bright.

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

DifferentialLast 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

• RatioNumerator 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 adjustedCompare:

Market CapPrice to Book (P/B)Tangible Book ValuesPrice to Earnings (P/E use TTM)Dividend YieldIndustry Group

Short the overvalued stockBuy the undervalued stock

Spread History

Compoundable TradesPredictabilityIntra-day ScalpsMarket Neutral Swing TradeRelative Strength PairsBasketsPair InvestingFundamental EdgeTechnical Edge

PairNomics, LLC.Traders Training Traders

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

A systematic, logical, low stress methodology tomaking consistent money in Today’s Markets.

“Go confidently in the direction of your dreams. Live the life you have imagined.”

– Henry David Thoreau

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.

e-mail within 30-days for Expo discount of 10%

e-mail today ! [email protected]

Contact us for:

[email protected]

www.PairTrader.com

Mentoring & Education

Compoundable Profitable Strategies

Data, Tools & Resources

Automated Trading Programs

Need Sponsorship?

Want to work with a Productive Team?

Use our Capital to Trade With - Apply Today!

E-mail us within 30-Days for EXPO Discounts off PairTrader products & services !