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RE: [amibroker] Re: To Correlate or Not to Correlate, that is the quuestion !



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Hi 
Dirk
<FONT face=Arial 
color=#0000ff> 
Thanks for 
this one, I am already on my way to these messages...yes it is difficult when 
you eventually end up with the knowledge and the there is not adequate products 
on our market to accommodate proper strategies...almost like " all dressed up 
and no where to go "  lol.
<FONT face=Arial 
color=#0000ff> 
Keep well and 
thank you !
<FONT face=Arial 
color=#0000ff> 
<FONT face=Arial 
color=#0000ff>Regards,
<FONT face=Arial 
color=#0000ff> 
<FONT face=Arial 
color=#0000ff>Louw

  <FONT face=Tahoma 
  size=2>-----Original Message-----From: dirk schreiber 
  [mailto:tianatrading@xxxxxxxxx]Sent: 25 November 2003 12:13 
  AMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re: [amibroker] 
  Re: To Correlate or Not to Correlate, that is the quuestion 
  !
  hi louw,
   
  several months ago there was a 
  thread about pair trading on this board with some very interesting posts by 
  yuki. have a look at message #38336 and #38346.
  correlation of 2 stocks (or 
  rather of their ROC) can go from -1 to 1.
  1 means "a perfect match" with 
  both stocks doing the same moves -- 0 means they are not correlated at all -- 
  and -1 means that one stocks does exactly the opposite as the other, so when 
  one stock of the pair goes up 3,7% the other would go down 
  3,7%.
  so if you are not able to trade 
  short with your broker you could *THEORETICALLY* try to find stocks with high 
  negative correlations and go long on both. but i seriously doubt that this way 
  you could achieve a market neutral position (which is what pair trading is all 
  about). if the whole market has huge up or down swings those negative 
  corelations are not likely to stay that way ...
   
  adios,
   
  dirk
  <BLOCKQUOTE 
  >
    ----- Original Message ----- 
    <DIV 
    >From: 
    <A title=louwcoetzer@xxxxxxxxxxxxx 
    href="">Louw-Roux Coetzer 
    To: <A title=amibroker@xxxxxxxxxxxxxxx 
    href="">amibroker@xxxxxxxxxxxxxxx 
    Sent: Monday, November 24, 2003 6:13 
    PM
    Subject: RE: [amibroker] Re: To 
    Correlate or Not to Correlate, that is the quuestion !
    
    Hi John 
    !
    <FONT face=Arial 
    color=#0000ff> 
    I think 
    so yes, reason being that not one of them will change the same in value... I 
    have tried it before when I discover a good share in consolidation phase 
    with low volatility...I would then buy the share via my stockbroker, but the 
    short side I unfortunately have to do via Spread trading of CDF's for that 
    matter...the situation here in SA is not the same as with you guys... but 
    they ripped me off heavily buy adjusting their spreads all the time into 
    both directions...thus no joy there...
    <FONT face=Arial 
    color=#0000ff> 
    So now 
    I'm out to long the whole lot with my normal stock broker ... but buy 
    balancing the portfolio with properly selected shares basedon volatility 
    and/or correlation, it is possible  to smoothen out the equity curve a 
    bit and reduce the overall volatility of the portfolio in whole... for this 
    a 100% non correlating option would no go down to well I 
    think...
    <FONT face=Arial 
    color=#0000ff> 
    Thanks 
    for your thoughts it is not wasted as you got me thinking of another plan 
    that I have not previously thought of...I will let you know as I take it 
    further !
    <FONT face=Arial 
    color=#0000ff> 
    Kind 
    regards & happy trading !
    <FONT face=Arial 
    color=#0000ff> 
    Louw 
    Coetzer
    
      <FONT face=Tahoma 
      size=2>-----Original Message-----From: john gibb 
      [mailto:jgibb1@xxxxxxxxxxxxx]Sent: 24 November 2003 06:13 
      PMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re: 
      [amibroker] Re: To Correlate or Not to Correlate, that is the quuestion 
      !
      Hi Louw.
       
      I have no actual pairs trading experience but 
      wouldn't '100% opposing' be the ideal A-will-outperform-B scenario? 
      Couldn't you then go long A and short B, with stops of course, once you 
      get a signal that A is likely to rise?
       
      -john
       
      PS: you might find this article of interest 
      <A 
      href="">http://www.thestreet.com/comment/openbook/1155546.html
      <BLOCKQUOTE 
      >
        ----- Original Message ----- 
        <DIV 
        >From: 
        <A title=louwcoetzer@xxxxxxxxxxxxx 
        href="">Louw-Roux Coetzer 
        To: <A 
        title=amibroker@xxxxxxxxxxxxxxx 
        href="">amibroker@xxxxxxxxxxxxxxx 
        
        Sent: Sunday, November 23, 2003 
        10:52 PM
        Subject: RE: [amibroker] Re: To 
        Correlate or Not to Correlate, that is the quuestion !
        
        <FONT face=Arial 
        color=#0000ff>Thanks JS - forgot about that one OOPS 
        !
        <FONT face=Arial 
        color=#0000ff> 
        <FONT face=Arial 
        color=#0000ff>Cheers
        <FONT face=Arial 
        color=#0000ff> 
        <FONT face=Arial 
        color=#0000ff>Louw
        
          <FONT face=Tahoma 
          size=2>-----Original Message-----From: johanskatt 
          [mailto:johanskatt@xxxxxxxx]Sent: 23 November 2003 04:29 
          PMTo: <A 
          href="">amibroker@xxxxxxxxxxxxxxxSubject: 
          [amibroker] Re: To Correlate or Not to Correlate, that is the 
          quuestion !The Correlation function might be 
          useful.<A 
          href="">http://www.amibroker.com/guide/afl/afl_view.php?name=CORRELATION/JS--- 
          In amibroker@xxxxxxxxxxxxxxx, "Louw-Roux Coetzer" 
          <louwcoetzer@xxxx> wrote:> ECM StationaryHi there all 
          !> > > > I have tried to think of various 
          methods to find a matching Non-Correlating> match for a 
          particular shareA ...I thought of doing this by adding the 
          close> for shareA  to the shareB and dividing it by 2 to 
          get an average price...I> would then use some form of 
          standard deviation to find out how much shareB> is 
          deviating from the average - the share that deviates the most 
          would then> be the most likely candidate - now I am 
          convinced this would not work as it> only suggests that 
          shareB is more volatile than anything else...> > 
          > > What I am trying to do is to scan a short watch list 
          and to find say 2 or 3> pairs ( 2shares/pair).  The 2 
          shares in each pair must be non-correlating to> a certain 
          extent in order to lessen risk if both are purchased ( almost 
          like> what Gary was talking briefly about in his presentation 
          ).  Obviously the> shares in the pair can not be 100% 
          opposing as then no money would be> made...My mind is still 
          a bit baffled about this and any suggestions and> guidance 
          in the right direction would be greatly appreciated...  I am 
          not> asking for an AFL Super Formula on a platter...only to be 
          pointed into the> right line appoach...I will try to create 
          the code myself ( the only way to> learn I believe ) and if 
          stuck will ask for a little push...> > > > 
          Kind regards> > > > > > Louw 
          Coetzer> > > > > > > 
          > > 
          ----------------------------------------------------------------------------> 
          ---->       Louw-Roux 
          Coetzer  -  louwcoetzer@xxxx> 
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