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Thanks
Chuck!
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<FONT face=Arial color=#0000ff
size=2>Tonetti's was a little terse.. 8-)
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You
mentioned that you work with hedge funds: Could pairs trading be
categorized as a "hedge" strategy?
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<FONT
face=Tahoma size=2>-----Original Message-----From: Chuck Rademacher
[mailto:chuck_rademacher@xxxxxxxxxx] Sent: Friday, April 18, 2003
5:57 PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker]
Pairs Trading (a definition for Dingo)
I'll
have a go at defining pairs trading for you.
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To
me, there are two different kinds of pairs trading (fundamental and
technical).
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<FONT face=Arial color=#0000ff
size=2>Before I get into that, however, I'll start by telling you that pairs
trading is NOTHING MORE than buying one stock and shorting another.
Usually, the dollars invested would be the same for each
stock.
<FONT face=Arial color=#0000ff
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<FONT face=Arial color=#0000ff
size=2>Fundamental pairs trading would be based on YOUR INTERPRETATION of the
fundamentals for those two companies. If you spent the time to
review the annual reports for Ford and General Motors, for instance, you might
decide that FUNDAMENTALLY Ford should outperform General Motors over the next
six months. So, you would buy Ford and short General Motors.
Your trade, in theory, should not be affected by any move in the entire market
or even the automotive sector. At the end of the six-month period
you would liquidate both positions.
<FONT face=Arial color=#0000ff
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<FONT face=Arial color=#0000ff
size=2>Technical pairs trading is a little more complex. Again,
you would be buying one stock and shorting another. Most
pairs traders might only trade a "pair" that were in the same sector, but that
isn't necessarily a requirement. The idea here is that you find
two stocks whose average daily returns move very much in
unison. I won't get into the math for determining this, but I'm sure you
get the picture. Let's say that you discover that
the daily returns for Ford and General Motors almost aways move
together. You also observe that if the returns move apart.... they
tend to come back together. You also observe the maximum
amount that they varied over some period of time. When you see
them move apart by that amount again, you simply short the one with the higher
returns and buy the one with the lower returns. Finally, you just wait
for the returns to come back together and liquidate both
positions. Again, the theory is that any major move in
the overall market has no effect on your net position.
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I
might add that many, if not most, of the professional fund managers using
pairs trading haven't done very well over the last quarter, generating
negative returns for their investors. I've been pairs
trading for two years, netting just over one percent per month for investors
in that particular fund. I can also tell you that, in my
opinion, any attempt at fundamental pairs trading is doomed for
failure.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: dingo
[mailto:dingo@xxxxxxxxxx]Sent: Friday, April 18, 2003 3:13
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE:
[amibroker] Re: Dynamic Indicators Poll -- VOTE AGAIN,
PLEASE
<FONT face=Arial color=#0000ff
size=2>Could you define "pairs trading" please?
<FONT face=Arial color=#0000ff
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<FONT face=Arial color=#0000ff
size=2>Thx!
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<FONT face=Arial color=#0000ff
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<FONT
face=Tahoma size=2>-----Original Message-----From: Fred
[mailto:fctonetti@xxxxxxxxx] Sent: Friday, April 18, 2003 3:08
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker]
Re: Dynamic Indicators Poll -- VOTE AGAIN,
PLEASEYes. I know. See my previous post, but for
example I don't want to have to write my own Stdev routine for
variable periods where it would require a For loop or a script to get
it done. As I've said before, IMHO the best thing about AB today
is it's speed and the LAST thing I want to do is slow it down w/For
loops if I don't have to. The best thing about the future of AB is of
course the support & potential enhancements and I'll be happy to
take the latter in whatever order Tomasz thinks best with my own
personal preference at the moment being the fixing of position size
transactions being automatically limited to total available cash
followed by some other aspects of portfolio trading i.e. pairs and
ranking etc.--- In amibroker@xxxxxxxxxxxxxxx, "DIMITRIS TSOKAKIS"
<TSOKAKIS@xxxx> wrote:> Fred,> take a look
at> > per=10+Cum(1)%20;//variable period from 10 to
29>
StochKa=MA(100*(C-LLV(L,per))/(HHV(H,per)-LLV(L,per)),3);>
StochDa=MA(MA(100*(C-LLV(L,per))/(HHV(H,per)-LLV(L,per)),3),3);>
Plot(StochDa,"",1,1);Plot(StochD(),"",4,8);> > for
example.> DT> --- In amibroker@xxxxxxxxxxxxxxx, "Fred"
<fctonetti@xxxx> wrote:> > Tomasz,> > >
> I agree completely that these are two different areas ... to me
> they > > are both important with (1) being higher
priority then (2) ...> > > > With regards to (1) and
more specifically those functions like ATR > > that require
multiple arrays ... I understand and in the case of > ATR >
> I'm not sure I care if this is even dealt with as again it's
simple > > enough like my example w/MACD to create ones own
ATR with a Foreign > > symbol using straight AFL.
> > > > In the case of a stochastic though it's
clearly valid to calculate > it > > as > >
> > 100 * (C - LLV(C, n)) / (HHV(C, n) - LLV(C, n)) >
> > > as opposed to using highs and lows. However here
again I'm not > sure > > I care as it's easy enough to do
these in straight AFL with n being > > time variant since
HHV and LLV are already have the capability of > > being time
variant.> > > > > > --- In
amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" >
<amibroker@xxxx> > > wrote:> > >
Hello,> > > > > > As I mentioned in the other
post of mine there are > > > TWO INDEPENDENT areas:>
> > > > > 1. Make input data array available for
functions like RSI> > > 2. Make second argument (period)
accept array too (variable > period).> > > >
> > Somehow people mix those 2 areas.> > > >
> > Fred speaks that he wants all functions to cover at
least> > > area (1).> > > > > > The
posts of Mark refer to area (2).> > > > > > Let
me show you example:> > > > > > RSI( period ) -
this function has no input data array (uses CLOSE > >
array> > > indirectly) and accepts static period> >
> > > > (1) RSIa( ARRAY, period ) - this function accepts
input data > array > > but accepts> > > only
static period> > > > > > (2) RSIa( ARRAY,
dynamic_period ) - this function accepts input > >
data array > > > and accepts both static and dynamic_period.
> > > (NOTE: Current version of AB does NOT support this
RSIa 'flavour' > > yet)> > > > > >
> > > As to (1): implementation of this is relatively
easy.> > > There is one caveat however: many analytical
functions> > > in fact use MORE than one input array. For
example Stochastics use> > > Close, Open and High arrays
as inputs.> > > ATR too needs OHLC, not only close.>
> > > > > As to (2): not every function is suitable for
this kind of > > operation. Although > > >
theoretically it is possible to rewrite every function to accept
> > such 'variable> > > periods' the practice shows
that transformations that are > recurrent > > in
nature> > > (exponential averages for example) are extremely
'sensitive' if > > parameter(s)> > > change to
fast. A kind of "frequency modulation" effect appears > > that
may produce> > > distortions therefore one should be careful
working with adaptive > > systems> > > using
recurrency-based transformations.> > > > > >
Best regards,> > > Tomasz Janeczko> > >
amibroker.com> > > ----- Original Message ----- > >
> From: <uenal.mutlu@xxxx>> > > To:
<amibroker@xxxxxxxxxxxxxxx>> > > Sent: Friday, April
18, 2003 5:28 PM> > > Subject: Re: [amibroker] Dynamic
Indicators Poll -- VOTE AGAIN, > > PLEASE> > >
> > > > > > > And IMHO also > >
> > LINEARREG, LINREGSLOPE, TSF > > > >
should be removed from your list. Please> > > > check the
remaining too... Test it in AFL editor (it will > inform >
> you> > > > via a small hint window about the params
after you type the > > opening brace).> > > >
UM> > > > > > > > ----- Original Message
----- > > > > From: <uenal.mutlu@xxxx>> >
> > To: <amibroker@xxxxxxxxxxxxxxx>> > > >
Sent: Friday, April 18, 2003 5:21 PM> > > > Subject: Re:
[amibroker] Dynamic Indicators Poll -- VOTE AGAIN, > >
PLEASE> > > > > > > > > > >
> > Hi mark, > > > > > can you clarify BBANDBOT
and BBANDTOP; > > > > > IMHO they both already do
accept user defined arguments> > > > > for all the 3
possible parameters to them. > > > > > UM> >
> > > > > > > > > > > > >
----- Original Message ----- > > > > > From: "markf2"
<feierstein@xxxx>> > > > > To:
<amibroker@xxxxxxxxxxxxxxx>> > > > > Sent:
Friday, April 18, 2003 4:03 PM> > > > > Subject:
[amibroker] Dynamic Indicators Poll -- VOTE AGAIN, > >
PLEASE> > > > > > > > > > >
> > > > > In Message 38132, Tomasz pointed out that HHV,
LLV, > HHVBars, > > LLVBars,> > > > >
> DEMA, TEMA, MA, WMA, REF, and SUM already work with
dynamic> > > > > > parameters. When I updated
the poll to reflect this, ALL > > votes were> > >
> > > lost so please vote again if you're still interested,
LOL.> > > > > > > > > > > > <A
href="">http://groups.yahoo.com/group/amibroker/surveys?id=1071266>
> > > > > > > > > > > I apologize for
the confusion. The fact that the above > > indicators
and> > > > > > functions accept dynamic parameters
was reflected in > release > > notes but> >
> > > > not in the 4.30 users guide that I used to make the
poll. > > The fact> > > > > >
that so many of you voted for them shows you didn't know > >
either, and> > > > > > I've asked Tomasz to include
this information in the next> > > > > >
documentation update.> > > > > > > > >
> > > Mark> > > > > > > > >
> > > "No good deed goes unpunished."> > > > >
> --Steve Karnish> > > > > > > >
> > > > > > > > > > > >
Send BUG REPORTS to bugs@xxxx> > > > Send SUGGESTIONS to
suggest@xxxx> > > >
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href="">http://groups.yahoo.com/group/amiquote/messages/)>
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href="">http://docs.yahoo.com/info/terms/
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