Pairs trade Wikipedia
Quantitative hedge funds do this and they might have thousands of stocks and make thousands of trades in their high-frequency strategy. Another example is that your pairs trade might only work during volatile periods. In this case, you might only want to execute it during the periods that work. Even if you choose 2 decent assets, it is unlikely that you will make money if you blindly trade every divergence. Moreover, profits and losses from these idiosyncratic stock effects might cancel out because you have exposure to many stocks. If you use the end-of-day data, you might not be able… Read More