*Doctorate Program, (Professional Trader, Senior Options Strategist) working since 2009
**Research Professional, (Financial Forensic Research, Statistical Modeling) working since 2015
Online published on 11 October, 2019.
Since 1987, pair trading has grown to be one of the most common and most researched strategies for market neutral returns. The strategy identifies stock that historically co-moved and forms a trading pair. To detect adequate pair different types of data analysis has been used. Here, we have used decoupled beta method for making trade. We have choosen ten different pairs from different industries for back testing. The most important finding of the study is that we found cyclical pair, perfectly correlated pairs and perfectly trending pairs. This type of portfolio can give handsome return in five years time period.
Pair Trading, Beta Decoupling, Correlation, Co integration, Spread
