If you're planning on pair trading, it's important that you have at least a general understanding of the statistics that are used. This article gives an overview of some of the key statistics used in pair trading and what to look for when analyzing them.
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Understanding the difference between correlation and cointegration is critical if you intend to pair trade stocks. Not knowing the difference is a sure fire way to mount up losses in your account.
Pair trading provides a unique way to profit in the stock market by not relying on market direction. Pair trading allows you to be profitable whether the market goes up, down or sideways.
Creating a profitable stock portfolio is not just about selecting the right stocks, it is about ensuring you understand how your positions relate to each other, how diversified your portfolio is and how exposed you are to different areas of the market. Correlation cluster charts give you the birds eye view needed to do this.
Finding a profitable edge in the stock market is no small feat. Whether your edge is based on technical or fundamental analysis, short term trading or long term investing, ultimately your goal should be to maximize that edge in a repeatable, efficient and scalable manner. This is where DiversifyPortfolio comes in.