Paired Trading

Podcast Duration: 05:14
Angel Broking Podcast ke iss episode me aapka swagat hai. Iss episode me hum discuss karenge pair trading ke baare me.

Jab aap naam sunte hain Pair trading - toh aapke dimaag me sabse pehli thought hoti hai - ke do stocks - that is - a pair of stocks are being traded. You’re right in thinking that. Let’s discuss pair trading in detail. Pair trading strategy sabse pehle Morgan Stanley ne introduce ki thi - jab researchers, computer scientists, mathematicians aur physicists sabne milkar ek automated trading program banaya tha taaki short-term market imbalances ko exploit kiya ja sake.

Toh aakhir pair trading hoti kya hai? Pair trading aap tab karte hain jab aapko do strongly correlated stocks milte hain. Ek me girawat ya badhautri ka direct asar doosre pe padta hai. So if you want to trade, aap ek stock me short position rakhte hain aur doosre stock me long position.

Long position ka matlab hua ke aap expect kar rahe hain ke iss stock ki value future me badhegi over time - toh aap us stock ko rakhte hain. Short position ka matlab hai ke aapka andaaza hai ke stock ka price jald hi girne wala hai, isliye aap stock bechne ke liye taiyaar rehte hain. Agar dono correlated stocks ka combination apne historical average pe wapas ayega, to kisi na kisi position se toh profit banega. Kyuki as a trader aapne long aur short dono positions le rakhi hain, market kisi bhi direction me jaa sakti hai - lekin pair trading ki effectiveness par uska asar nahi padega. Yahi reason hai ke hum pair trading ko ‘market-neutral’ trading strategy kehte hain. Pair trading ke work karne ke liye zarurat sirf itni hai ke jo correlated stocks hain, woh wapas similarly perform karein after separating. Ye pair ek saath rally aur drop ho sakta hai, lekin in dono stocks ka sync me wapas aana bahut zaruri hai. Theory me ye aise work karta hai. Aap practical life me dekhenge to you will find that mitigating risk, figuring ke kab konse pair trade ke liye opt kiya jaaye and kab exit kiya jaaye - ye sabhi decisions kaafi precisely liye jaate hain.

Toh phir swaal ye uthta hai ke aap sahi pair of strongly correlated stocks kaise chunenge? In the next section of this podcast, main aapko pair choose karne ke tips dungi. Pair of stocks dekhne ka Sabse simple tareeka hai uski historical performance ko track aur analyse karna. Agar pichle 6 mahine, 1 saal, 3 saal aur 5 saal ki performance ko assess karein, toh historically dono stocks ke beech ke correlation ka idea ho jayega. Stocks pick karte hue is baat ka bhi dhyaan rakhein that they will likely be from the same sector.

Technical analysis karte samay aap correlation coefficient ka bhi use kar sakte hain. Ye coefficient aapko ek decimal value dega jo aapko dono stocks ke beech ke positive ya negative relationship ka idea dega. For instance, -1 ka matlab hoga 100% negative correlation - what does this mean? Ke jab ek stock upar jayega to doosra utne hi extent se neeche jayega. On the other hand +1 implies 100% positive correlation. THis would mean ke jab ek stock upar aata hai to doosra bhu upar ayega. It is a perfect correlation in both these cases. Real life example lein, toh EUR?USD currencies aur GBP?USD currencies make an almost perfect positive correlation. Iss correlation ke wajah se ye pairs pair trading ke liye ideal hain.

Even when you hunt for a pair to trade, unka strong positive correlation at least 0.80 hona chahiye between the pair of stocks.

Now that you understand pair trading in much better detail, let me lay down the steps involved. Sabse pehle aap ek selection criteria banaye: aap sector ke basis pe choose kar sakte hain ya timeframe ke according, as an example.

Uske baad apne potential pairs ki ek list banaye jinme kam se kam 0.80 ka correlation ho. Unn pairs par aap fundamental, technical ya statistical analysis karein. Agar koi correlational discrepancy hoti hai, toh pair trading ki jaa sakti hai. Uske baad trade manage karein and wait for the pair to reunite. Ek baar pair apni original correlation pe wapas a jaye, tab aap trade ko close kar sakte hain. Pair trading ka sabse bada fayda ye hota hai ke aapko market conditions study karne me bahut time nahi lagana padta, kyuki ye market-neutral strategy hai.

Ek benefit flexibility bhi hai - alag tarah ke traders can use this trategy - agar aap short-term prefer karte hain to short timeframe par rely kar sakte hai aur trades ke liye small standard deviation use kar sakte hain. Now you must be thinking ke pair trading ka bhi kuch toh catch hoga? You’re right. Pair tading me ye pata laana bahut mushkil hai ke correlational discrepancy - jiske basis pe aap decision le rahe hain, woh temporary hai ya nahi. It is possible ke kayi baar is tarah ki discrepancy company ke fundamentals badalne ki wajah se aati hai. Lekin iss risk ko bhi manage kiya ja sakta hai- ek stop-loss laga kar. Iska matlab hai ke agar aapke stocks ek point se zyada diverge kar rahe ho to aap exit kar lenge.

Ek catch pe bhi hai ke historical correlation wale stocks dhudhna mushkil hota hai - aur iss wajah se ye trading strategy seasoned traders ke liye zyada suitable ho jaati hai.

Aap humare bataye tips yaad rakhein - and you too can become a seasoned trader with practice!