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In a nutshell, Relative Strength Comparison (RSC).
jose '-)
http://www.metastocktools.com/URSC/URSC.htm
--- In equismetastock@xxxxxxxxxxxxxxx, Kevin Barry <kevin_barry@xxx>
wrote:
>
> Many thanks for your suggestion. Sorry that I didn't explain it very
> well.
> I am really looking to find a price derivative with which I can measure
> the price deviation between two securities. So, security A would be
> treated as a virtual straight line plot at zero with the plot of
> security B oscillating around it.
>
> Regards,
> Kevin
>
>
>
> At 10:37 14/04/2007 -0700, you wrote:
>
> (security("A",C)-security("B",C))/security("A")*100 {percentage plot}
>
> Not sure what you mean about plotting security A as a straight line.
>
>
> -----Original Message-----
> From: <mailto:kevin_barry%40candytape.com>kevin_barry@xxx
> To: equismetastock@xxxxxxxxxxxxxxx
> Sent: Sat, 14 Apr 2007 6:37 AM
> Subject: Pairs Trading Perhaps Using The Security Function
>
> Hello,
>
> Could I pick your (collective) brains?
>
> Two securities can be compared using the Security function and then
> subtracting or dividing one plot from the other. The results in a
> trending plot.
>
> What I would like to achieve is to plot equity A as a straight line and
> then have the second plot displaying the difference between equity A and
> equity B. Ideally, this plot would indicate the percentage deviation
> rather than just the number of points difference.
>
> For those of you interested, the idea behind Pairs Trading is to
> identify two stocks that are closely correlated. When a divergence is
> detected, one would go long, say, equity A and short equity B in
> anticipation of the correlation being reestablished in the future. It is
> a market neutral strategy.
>
> Is this doable in Metastock?
>
> Regards,
> Kevin
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