|
PureBytes Links
Trading Reference Links
|
Hi Chuck,
I have often successfully traded one sided DIA-options using the
same pairs idea. The pair I use comes from The Dow Theory
that specifies the relation between TANSPORTATION and DJiA
The critical thing is that the correlation between any
pair must be there atleast in theory or some solid reasoning
as to why the pair ought to be correlated. With 8000 stocks
there would be about 64 million correlated pairs, and some
very stong correlations will appear just by chance.
With smaller sets of stocks, I have looked at relatedness
via SSA ( a type of Euclidean distance) analysis that
will show different clusters. I am going in this direction
but have not developed a system or even done a single trade as
yet. I think SSA is better than looking at correlations which
can be "dishonest" or "spurious" and quite there by chnace. Give
us an example, may age and the price of gasoline is extremely
highly correlated but meaningless!
Interested in your work very much.
tia
nand
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> You may recall that I have been making a concerted effort to come
up with
> some system ideas using "pairs trading". I don't know how
successful any
> of you have been at coming up with systems for shorting stocks, but
I am
> extremely frustrated by the need to maintain a dollar and/or beta
neutral
> portfolio in keeping with the rules of the funds that I manage. As
a rule,
> my short trades are lucky to break even. Fortunately, my long
trades are
> quite profitable.
>
> I am going to put forth some ideas that should have been more
obvious to me
> some time ago and may already be obvious to you. Like a lot of
you, I have
> what I think are excellent systems for trading the long side. I
also have
> excellent systems for trading "pairs". My pairs trading has been
100%
> isolated from the other styles of trading that I do.
>
> My daily search for pairs to trade never really had a starting point
> (watchlist). The system takes each of the currently active stocks
(8,000+)
> and tries to find another stock to trade against it. There was no
starting
> bias. The system looks for the most highly correlated pairs of
stocks to
> trade; one long and one short.
>
> Late yesterday, I had a thought come to me to take the just the buy
signals
> generated by my best "long" system and only look for a pair to
trade against
> each of those. It's early days in the research, but it looks like
an
> exceptionally good idea. Instead of making a mediocre 1.5 to 2%
per month,
> the research suggests almost doubling that return while still
maintaining a
> dollar, beta, sector and volatility neutral stance.
>
> Any comments would be appreciated and I'd be happy to work closely
with
> anyone interested in pursuing this endeavour. AmiBroker is
definitely the
> tool of choice for this job, hence my posting to this group.
>
> Cheers
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Get A Free Psychic Reading! Your Online Answer To Life's Important Questions.
http://us.click.yahoo.com/O10svD/Me7FAA/AG3JAA/GHeqlB/TM
---------------------------------------------------------------------~->
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|