Stock Pair Trading the Top 30 Nov 2020 Vintage: First Five Weeks’ Results

For those of you who are new to this site, stock Pair Trading involves simultaneously entering LONG (i.e. BUYING) and entering SHORT (i.e. SELLING) two “paired” stocks.

stock pair trading

Why Pair Trade Stocks?

Stock Pair Trading has been shown to provide 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**.

Stock Pair Trading with PairTrade Finder® PRO’s Top 30 Cointegrated Stock Pairs

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.  These 30 cointegrated stock pairs come 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.

This update ensures these pairs stay fresh and their correlations and cointegrations strong to offer you the highest-probability setups.

Additionally, all selected stock pairs must meet strict additional fundamental correlation criteria and profitability and robustness measures.

November 2020 Vintage 5-Week Performance: Live Signal Results vs. Published Backtest Results

Our November 2020 vintage of Top 30 Cointegrated U.S. Stock Pairs was released after the close on 24 November 2020.  They have 63-day lookbacks and 2.50 Entry Stretches and 0.80 Exit Stretches.  Here are the backtest results that led us to select these pairs:

stock pair trading

95% Win Rate, 5.2x Reward/Risk, profits of $68,004 in a year (at $10k/leg trade size).  Frankly those are some pretty fantastic looking backtest results.

Nevertheless, in the real world, in-sample and out-of-sample results are very different things.

Live Trading Signals Results

So here are the out-of-sample results of the exit signals and open trades of the November 2020 Vintage in from 25 November to 31 December 2020.   These stock pair trades represent signals you could have traded live:

stock pair trading

Six exits, five winners, one loser, an 83.3% win rate, for a total profit in the the first three weeks of $2,763 (assumes a $10k/leg trade size). Largest winner of $1,297 and largest loser of -$86.  Wow.

And the currently open positions:

stock pair trading

are showing a mark-to-market PnL of $-538 as of  Dec. 31st close.

That’s a $2,225 net profit showing for the out-of-sample trade signals on the November Vintage Top 30 since their launch five weeks ago.  The account margin employed to hold six trades open at $10,000/leg is about $24,000 (at 5:1 CFD leverage).  So the five-week return on imputed margin for the November Vintage is approx. 9.3% (before margin interest expense but after assumed commissions and slippage of 10bp per leg, per trade).

How Did Top 30 Stock Pair Trading Perform vs. the S&P 500?

Over the same five-week period, the S&P 500 (SPY ETF) also did very well, returning 2.9%.

We’ll take the 9.3% instead…equates to more than 7% monthly (and though we use leverage, our long/short trading style reduces net exposure to a substantially lower level than equivalent leverage on long-only).  See disclaimer below.

Do you see now why we like cointegrated stock pair trading?

Start learning stock pair trading 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.  They 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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