New Top 30 Cointegrated Stock Pairs Post a Blowout 11.9% Profit in March

cointegrated stock pairs

Profit From Volatility by Using Cointegrated Stock Pairs

We’ll cut to the chase.  Extreme volatility juices cointegrated stock pairs trading returns, and market crashes can bring special opportunites.  We can show you a lot of research studies that support this assertion.

That’s why professional traders and managers are attracted to the stock pair trading strategy.  Pair Trading, which involves simultaneously entering LONG (i.e. BUYING) and entering SHORT (i.e. SELLING) two “paired” securities, provides protection from market crashes, controlled risk, low correlation to the market averages and ability to generate significant and consistent returns.  Multiple recent research studies have demonstrated returns to be in the range of 2%-4% per month*, on a 4:1 leverage basis, over more than a decade.

Add in the use of Cointegrated Stock Pairs and the historical returns look even stronger**.

PairTrade Finder® PRO’s Top 30 Cointegrated Stock Pairs

But we prefer to put our money where our mouth is.  Some of you may know that when you subscribe to PairTrade Finder® PRO under one of our periodic Special Offers, we include our Top 30 US Equities Pairs.  We’ve arranged for these 30 cointegrated stock pairs to be auto-loaded into our platform when you boot up PRO.

How do we find these pairs?

We analyse and over 1,800 US equities with market caps over $2 billion and daily traded volumes of at least $2 million to find you the best cointegrated stock pairs for you to trade.  We update this analysis on a more or less quarterly basis to ensure these pairs stay fresh and their correlations and cointegrations strong to offer you the highest-probability setups. All pairs must meet strict additional fundamental correlation criteria and profitability and robustness measures.

Our Top 30 Performance for March 2020: Live Signal Results vs. Previous Backtested Results

So how did these cointegrated stock pairs perform in this 20-30% overall market crash?

We launched these new Top 30 on 1 March 2020.  They have 63-day lookbacks and 2.70 Entry Stretches and 1.0 Exit Stretches.  So they have shorter trade durations than the old Top 30. Here are the backtest results that led us to select these pairs:

Top 30 BACKTEST RESULTS from 1 March 2019 to 29 Feb 2020 (Latest Twelve Months at launch)

cointegrated stock pairs

99% Win Rate, 3.2x Reward/Risk, profits of $33,189 in a year (at $10k/leg trade size).  Frankly those are some pretty fantastic looking backtest results.

However, as any seasoned system trader knows, in-sample and out-of-sample results are very different things.

So here are the:

 TOP 30 LIVE TRADING SIGNALS RESULTS (end-of-day) from 1 March -1 April 2020

(i.e. out-of-sample results that you could have traded live)

cointegrated stock pairs

24 trades in a month, 75% Win Rate, 2.1x Reward/Risk and over $18,000 of profit in a month ($10k/leg trade size)…that just demonstrates the extreme market volatility we experienced in March.

It is sad and frustrating that this volatility is associated with an unprecedented global health emergency that has been translated into a global economic emergency.  Our thoughts and prayers go out to all affected by the Sars-Cov-2 virus.

Nevertheless, as a pair trader, you don’t necessarily need to suffer the 20%-30% loss that the indices delivered.  Look at the profitability effect of that volatility on the return on imputed account equity below (as of market close 1 April 2020):

cointegrated stock pairs

And there you have it.  Live signals from PairTrade Finder® PRO’s Top 30 Cointegrated Stock Pairs for March 2020 delivered 11.9% return on imputed account equity, a 75% win rate and a 2.1x Reward/Risk ratio and over $18,000 in profit ($10k/leg trade size)…all in one month.  See disclaimer below.

Relative Performance vs. S&P 500: Over 28% Alpha Generation in One Month

Over the same month, the S&P 500 (SPY ETF) lost 16.4%.  That implies the Top 30 generated an alpha (performance relative to the index) of approx. 28.3% for the month of March.  We find that result quite spectacular.

Start learning to pair trade stocks long/short today.  Join our 30-minute webinar, free trial, 3-Hour Video Course, eBook and get the Top 30 US Equities Pairs to turbo-charge your potential results straight out-of -the-box. Sign up on this blog’s sidebar or at www.pairtradefinder.com.

Happy Trading!

The PairTrade Finder® Team

* See https://blog.pairtradefinder.com/pair-trading-research-studies-articles/ for studies underlying pair trading’s profitability.

** See https://www.researchgate.net/publication/273959237_Pairs_trading_and_selection_methods_Is_cointegration_superior

NB: The Top 30 U.S. equities pairs in PairTrade Finder® PRO are provided for informational and educational purposes only and should not 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. Please see our full Terms & Disclaimer.

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