In today’s volatile markets, achieving consistent returns while managing risk is a challenge for even the most seasoned investors. At PairTrade Finder®, we’ve developed a powerful, systematic approach to stock pair trading that’s delivering exceptional results.
Our PTF Beta Portfolio, powered by the PTF Ultimate Alpha 3 system, has posted a remarkable +13.2% return year-to-date in 2025. This performance easily outpaces the S&P 500 ETF (SPY) at -0.3%, the largest Long/Short ETF (FTLS) at -0.7%, and the risk-free rate at +1.9%.
What’s behind this success? A cointegration-based stock pair trading strategy that combines sophisticated mathematics with disciplined execution to generate non-correlated alpha:
The Power of Cointegration in Pair Trading
Pair trading is a market-neutral strategy that involves simultaneously buying one stock and selling another, typically within the same sector, to capitalize on their relative price movements. The key to our approach lies in cointegration, a statistical property that identifies pairs of stocks whose prices move together over time, despite short-term divergences. Unlike correlation, which measures linear relationships, cointegration ensures that the spread (price difference) between two stocks remains mean-reverting—meaning it tends to return to a stable average over time.
This mean-reverting behavior is the cornerstone of our strategy. By identifying cointegrated stock pairs, we can exploit temporary mispricings when the spread widens, buying the undervalued stock and shorting the overvalued one. When the spread converges back to its mean, we capture the profit. This approach thrives in choppy markets, as it’s agnostic to overall market direction, making it an ideal tool for generating alpha in uncertain times.
PairTrade Finder® Beta Portfolio: A Case Study in Alpha
Since January 1, 2025, our PTF Beta Portfolio has executed over 260 closed trades across 118 USA stock pairs via an Interactive Brokers paper trading account. The results speak for themselves: a +13.2% return, compared to SPY’s -0.3% and FTLS’s -0.7%.
But what truly sets our strategy apart is its risk-adjusted performance. With a maximum drawdown of just -2.4% (versus SPY’s -17.3% and FTLS’s -10.9%), a Sharpe Ratio of 2.21 (versus SPY’s -0.23 and FTLS’s -0.41), and a Sortino Ratio of 4.31 (versus SPY’s -0.31 and FTLS’s -0.54), our portfolio demonstrates exceptional reward-to-risk characteristics.
Our 100% market-neutral approach, combined with systematic pair selection, precise execution, and tight risk controls, minimizes downside while maximizing upside. This disciplined framework, powered by our PTF Ultimate Alpha 3 software and proprietary Top USA Stock Pair Stars screening system, ensures consistent performance across market conditions.
Why Cointegration-Based Pair Trading Shines
The beauty of cointegration-based pair trading lies in its ability to deliver non-correlated alpha, making it a valuable addition to any portfolio. By focusing on relative price movements, it reduces exposure to market-wide risks, offering stability in turbulent times. Additionally, the strategy’s reliance on statistical rigor and automation eliminates emotional biases, ensuring consistent execution. For investors seeking diversification and resilience, our approach provides a compelling edge.
Ready to Tap Into the Power of Pair Trading?
The PTF Beta Portfolio’s 2025 performance highlights the potential of cointegration-based pair trading to outperform traditional benchmarks with lower risk. Want to discover the secret sauce behind our success? Visit PairTrade Finder®’s video on cointegration to learn how our PTF Ultimate Alpha 3 system can enhance your portfolio with non-correlated alpha.
Happy Trading!
The Pair Trade Finder® Team
NB: These pairs are provided for informational and educational purposes only. As always, trading involves risks. Past performance is not indicative of future results. Nothing herein should be construed as personalized investment advice. It should not be assumed that trading using the parameters demonstrated by the Software will be profitable and will not result in losses. See our terms & disclaimer here.
E