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What is Pair Trading?

There are many ways to make money in stocks, one such technique is called pair trading. Pair trading has been used by institutional investors and major investment banks since its start in the 1980s.  Having the potential to achieve profits through nearly low-risk positions and from any market conditions, such as uptrend, downtrend, or even a sideways movement.

The pair trading technique is a market-neutral trading procedure, which matches a long and a short position in a pair of stocks that are in the same sector. So what is pair trading exactly the short definition is the purchasing of one stock while selling another that is in the same sector. There is however a bit more to it than just the buying and selling of stocks. Pair trading makes use of under-performing stocks, meaning a stock that is not selling as well as another.

The objective is to match two highly-correlated stocks, betting that the spread between the two will converge at some point. The discrepancy between two stocks may be cause by many things such as large buying and selling for a stock, temporary supply and demand, or even a reaction for some important news on a company.

Traders look at stocks in the same sector like General Motors (GM) and Ford (F) or Wal-Mart and Target, finding the two that are most correlated to each other in movement.  To make pairing easier the two should have something in common whether sector or asset.

Next they will confirm the correlation with charts determining if they do move together. Doing this can be done with a correlation coefficient. there are online tools that can be searched for that will yield a “correlation coefficient calculator” as well as Excel has a “CORREL” function that will help to perform the calculations needed, and still yet some platforms provide a technical indicator that helps with this as well.

Finally before they can be bought and sold a price ratio or (relative performance )chart must be created. This is a chart of both of the stocks plotted together, it measures the deviation from the mean or normal spread in the pair. Some have a technical indicator that will help to figure this out others can use a average and standard deviation formula in Excel.

Once this chart has been plotted then the traders will look at the deviations in the stocks when the ratio moves from the mean they will go long (buy) on the lagging or underpriced stock and short (sell) on the overpriced stock.  The money made from selling the overpriced stock can fund buying the underpriced stock.

There are many strategies in pairs trading such as Standard deviation, spread price, price ratio, and percentage divergence. Each of these have the same base for pairs trading were they differ is in the method used in determining the price ratio.

The real question is when to jump in, and when to exit for both profit and loss depending on the standard deviation excursions.

Sticky: Storm Shadow’s Jewelry Now Open

Looking for just the right piece of jewelry to wear look no further Storm Shadow’s Jewelry has it.

We have all kinds of handmade beaded and gemstone items from Turquoise to Malachite and many others.
stop by and take a look. We will have special pieces each month or holiday too.

We have many pieces to offer and more and more are being added each and every day.

New Book Review: The Disappearance by Susan Berliner

I have written up a new book review this one is for The Disappearance by Susan Berliner. You can read it here. I hope you enjoy it just as much as I did.

 

You are loved and missed Mom!

mom 2001 memorialI last physically saw my mother in June of 2012. I went out to Arizona to see her, because we learned that she had contracted a rare strain of cancer, and the node was resting on her carotid artery. This same strain of cancer took my great-great-grandmother from us many years ago.

Since my visit we only were able to talk through texts and our Google Hangouts had to stop because I couldn’t understand her whispering voice. She was getting weaker but by the middle of this year we learned the cancer was gone and she was starting to recover.

So when my mother passed away in her sleep on October 25th, 2013 it was a surprise to us all. We were caught unprepared and we had no plans in place or funds set aside.

My two younger brothers have had a separate life from my Mother and I, they are acting like they don’t want anything to do with her death, or even care. Which is making it harder on me.

At this point in time the funeral home is preparing to consider the body abandoned as outlined by county law in Arizona. We’re in Florida, This is being done because my brothers are not stepping up, and we don’t have the upfront money to pay for a cremation and claim the remains. Should this happen I won’t be able to claim any of her ashes, and bring her home, this would leave me heartbroken.

The cost of cremation is $2300.00 and we have no money to put towards it. Zero, zilch, nada. We only have till the 3rd of December to raise the money, this is why I am so desperate to raise the money.  So I can bring my mother home, so she can be with family. I miss her, and want her with me.

I plan on placing her ashes with her Grandmother, Mother, Sister, and my cousins at our family plot in Montgomery, Alabama and keeping a portion of them with me so she’s always with me.

If you can help I would be grateful, also spreading the word is helpful too. I want nothing more than to bring her home. This would be all I want for Christmas.

We have a fundraiser going to Help Bring Mom Home this one will allow you to use more than just paypal

My husband Anthony Miller has been promoting a fundraising link on FaceBook and Google+ as well that he set up before this one that most people have been donating too. Here are those post links.

Facebook link  and Google+ link

 

Business Cards

I finally recieved in my business cards I am so tickled, the look awesome. I had to finally get them updated from the old ones because of the address and phone number were wrong. In the picture I have the phone number grayed out. I hope that they will serve me well.

businesscardphone covered

Jobs Lately

It has been hard to find any work lately, I am just glad I have the one little small writing job I do have. It may not pay much but it brings in enough to pay my cell bill and my website each month. So if anyone knows of anyone that wants a virtual assistant let me know I will be happy to fill the position.