34 Pairs to Watch Out for

4 years, 6 months agoComments closed

pairs-trading tips

At techpaisa, you can analyse a pair of stocks to see the pairs trading strategy results here. We continue our effort to provide you valuable information of which pairs to follow. We analysed over 3,000 pairs to find out profitable pairs. Here is a list of 34 pairs which have been chosen among thousandsof pairs. These pairs contian stocks which are traded in futures. As number of stocks traded in futures have gone down considerably, number of cointegrated pairs which have stocks traded in futures has also decreased.

If you want to receive real time daily pairs trading recommendations in your inbox, contact us: feedback@techpaisa.com

View our previous list of chosen pairs here.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

93 Pairs to Follow

4 years, 8 months ago0 Comments

pairs-trading tips

At techpaisa, you can analyse a pair of stocks to see the pairs trading strategy results here. We continue our effort to provide you valuable information of which pairs to follow. We analysed over 3,000 pairs to find out profitable pairs. Here is a list of 93 pairs which have been chosen among thousandsof pairs.

If you want to receive real time daily pairs trading recommendations in your inbox, contact us: feedback@techpaisa.com

View our previous list of chosen pairs here.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Long BEML, Short IRB

4 years, 9 months agoComments closed

pairs-trading irb beml
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Long AXISBANK, Short ANDHRABANK

4 years, 10 months ago5 Comments

pairs-trading axisbank andhrabank

Update 10th July 2:10PM: Reverting positions. Selling AXISBANK Futures at 1071 and buying ANDHRABANK at 117.6. Total Profit Rs. 10200 (Without deducting Brokerage).

Today’s recommendation is Short ANDHRABANK - Long AXISBANK.

According to our analysis, for every 1 futures lot of AXISBANK, trade 1 futures lot of ANDHRABANK. Use JULY Expiry Futures.

ANDHRABANK July Futures is trading at Rs. 120.2 and AXISBANK July Futures is priced at Rs. 1051.

Keep you stop loss when divergence becomes 2. Divergence right now is 1.3. Book your profits when divergence becomes 0.

Half life of this pair is 5.27. We expect to hold positions to a maximum of 11 days.

Watch this blog for future updates.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

DISCLOSURE: I am short ANDHRABANK and long AXISBANK.

DISCLAIMER: If you trade stocks/derivatives, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

Chosen Pair of Stocks for Pairs Trading Strategy

5 years ago1 Comment

pairs-trading tips

At techpaisa, you can analyse a pair of stocks to see the pairs trading strategy results here. We analysed over 3,000 pairs to find out profitable pairs. Here is a list of 45 pairs which have been chosen among thousands of pairs.

Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Long AXISBANK Short NIFTY

5 years, 6 months ago0 Comments

pairs-trading tips nifty axisbank

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

DISCLOSURE: I have no positions in NIFTY & AXISBANK and no plans to initiate any positions in next 72 hours.

Today’s recommendation is Short NIFTY - Long AXISBANK.

According to our analysis, for every 2 futures lot of AXISBANK, trade 3 futures lot of NIFTY. Use DECEMBER Expiry Futures.

NIFTY December Futures is trading at Rs. 4751.4 and AXISBANK December Futures is priced at Rs. 969.5 on Nov 25 2011 at 11:25PM.

Keep you stop loss when divergence becomes -1.5. Divergence right now is -0.6. Book your profits when divergence becomes 0.

Watch this blog for future updates.

Stay tuned for latest updates:

Techpaisa Team.

Long JSWSTEEL Short JINDALSTEL

5 years, 6 months ago0 Comments

pairs-trading tips jindalstel jswsteel

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

DISCLOSURE: I am Short JINDALSTEL & Long JSWSTEEL.

Today’s recommendation is Short JINDALSTEL - Long JSWSTEEL.

According to our analysis, for every 1 futures lot of JSWSTEEL, trade 1 futures lot of JINDALSTEL. Use NOVEMBER Expiry Futures.

JINDALSTEL November Futures is trading at Rs. 547.75 and JSWSTEEL October Futures is priced at Rs. 666.25 on Nov 17 2011.

Keep you stop loss when divergence becomes -1.5. Divergence right now is -0.83. Book your profits when divergence becomes 0.

Watch this blog for future updates.

Update 1 (23rd Nov 2011 End-of-Day): Exited today as tomorrow is expiry day and don’t want to remain in the position on expiry day. Exited JSWSTEEL at Rs. 547 and JINDALSTEL at Rs. 490.5 today. Total loss Rs. 1187.5 (Brokerage & Taxes Extra)

Stay tuned for latest updates:

Techpaisa Team.

Long UNIONBANK Short BANKNIFTY

5 years, 6 months ago1 Comment

pairs-trading tips

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

DISCLOSURE: I have no positions in BANKNIFTY & UNIONBANK and no plans to initiate any positions in next 72 hours.

We are excited to start recommendations based on pairs trading strategy. Today’s recommendation is Short BANKNIFTY - Long UNIONBANK.

According to our analysis, for every 2 futures lot of UNIONBANK, trade 3 futures lot of BANKNIFTY. Use NOVEMBER Expiry Futures.

BANKNIFTY November Futures is trading at Rs. 9339.85 and UNIONBANK October Futures is priced at Rs.221.3 on Nov 11 2011 at around 12:37PM.

Keep you stop loss when divergence becomes -1.5. Divergence right now is -1.1. Book your profits when divergence becomes 0.

Watch this blog for future updates.

Update 1 (Nov 18, 2011 1:54 PM): Booking profit now, UNIONBANK Nov futures trading at Rs 210 and BANKNIFTY Nov futures trading at Rs. 8805. Total profit Rs. 17513 (Brokerage & Taxes extra)

Stay tuned for latest updates:

Techpaisa Team.

Long ESCORTS, Short ASHOKLEY

5 years, 7 months ago0 Comments

pairs-trading tips

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

DISCLOSURE: I have no positions in ASHOKLEY & ESCORTS and no plans to initiate any positions in next 72 hours.

We are excited to start recommendations based on pairs trading strategy. Today’s recommendation is Short ASHOKLEY - Short ESCORTS.

According to our analysis, for every 1 futures lot of ESCORTS, trade 2 futures lot of ASHOKLEY. Use OCTOBER Expiry Futures.

ASHOKLEY October Futures closed at Rs.24.45 and ESCORTS October Futures closed at Rs.71.35 on Oct 7 2011.

Keep you stop loss when divergence becomes -2.5. Divergence right now is -1.91. Book your profits when divergence becomes -0.5.

Watch this blog for future updates.

Update 1 (13th Oct 2011 End-of-Day): ASHOKLEY October Futures closed at Rs. 24.55. ESCORTS October Futures closed at Rs. 78.15. If you traded 1 lot of escorts and 2 lots of ashokley, total profit till now is Rs. 12000. Hold these positions till divergence becomes -0.5.

Update 2 (17th Oct 2011 End-of-Day): ASHOKLEY October Futures closed at Rs. 24.3. ESCORTS October Futures closed at Rs. 80. If you traded 1 lot of escorts and 2 lots of ashokley, total profit till now is Rs. 18500. Hold these positions till divergence becomes -0.5 or any further update here.

Update 3 (25th Oct 2011 End-of-Day): ASHOKLEY October Futures expred at Rs. 25.4. ESCORTS October Futures expired at Rs. 83.35. If you traded 1 lot of escorts and 2 lots of ashokley, total profit till is Rs. 8800. Positions closed.

Stay tuned for latest updates:

Techpaisa Team.

Pairs Trading Strategy for Indian Stock Market

5 years, 8 months agoComments closed

pairs-trading tutorial

We are pleased to announce that now you can analyse any pair of stocks using well-known pairs trading strategy at techpaisa. To the best of our knowledge, we are the first website in India to provide this utility online, and free of cost as of now.

What is pairs trading?

As the name suggests, pairs trading strategy works with a pair of stocks. First step is to find a pair of stocks or indices whose prices “move together”. Moving together of price is technically known as cointegration. Idea is to find the pair of stocks which move together but occasionally, this pair will diverge from the average. Whenever a pair diverges from their mean, take positions in both the stocks (one long position and one short position). Gradually, when the prices of these stocks revert to the mean, exit the trades and book profit.

Pairs trading is a market-neutral strategy. A market-neutral strategy means that profit doesn’t depend on the direction of market. As long as the prices of pair of stocks revert to mean, you make money.

How to choose pairs?

First step in pairs trading strategy involves choosing pairs. We suggest you choose stocks from the same sector or subsector. Other pair could be to take one index and choose one of the constituent stocks. Example pairs: SBIN-AXISBANK, AMBUJACEM-ACC. You can also consider two indices as a pair.

At techpaisa, you can do pairs trading here. When you have chosen a pair, use first stock as stock whose market capitalization is more than the second stock. We also give a confidence in statistics of finding pairs, always use pairs with atleast 60% confidence.

How to do pairs trading?

After you have chosen that a pair of stock prices move together, you have to wait for the prices to diverge from their mean. When the prices diverge from their mean, one stock become overvalued and the other undervalued. The bet is that undervalued stock will outperform the overvalued stock and prices will revert to mean. You take long positions in undervalued stock and short positions in overvalued stock. By doing this, your positions become market-neutral (at-least theoretically).

Question is at what divergence, you will take positions, we suggest waiting for a divergence of at least 2 standard deviations from the mean. You can devise your own strategy. We strongly recommend you keep a target and a stop loss for your positions. Keep your target to the point where divergence reverts to 0.5 of standard deviation from mean. Keep your stop loss if divergence becomes 2.5 or 3 times standard deviation from mean.

We backtest pairs trading strategy on historical data to find out optimal entry divergence and stop loss divergence. So for some pairs, you will find that entry divergence is different from +2 or -2.

Example

We will take nifty and banknifty as an example. With 90% confidence, nifty and banknifty prices move together. NIFTY is STOCK1 and BANKNIFTY is STOCK2. Sequence of stocks in a pair matters because based on divergence and sequence of stocks we will determine which stock to long and which stock to short.

In the chart below, prices of nifty and banknifty diverges at 2.01 (standardized error) times the standard deviation from mean. We take positions when standardized error is approaching 2 from above or -2 from below i.e. divergence is decreasing. In the figure below, divergence is approaching -2 from below which means STOCK2 (banknifty in this case) is undervalued (long banknifty) and STOCK1 (nifty) is overvalued.

Standardized Error - Deviation from mean as a multiple of standard deviation

In the chart below, we have the prices of nifty and banknifty.

Nifty and Banknifty price

We take positions on 7th January 2011. Since banknifty is undervalued and nifty is overvalued. We go Long BANKNIFTY and Short NIFTY. Quantities are also decided based on Cointegration Coefficient which we call slope on analysis page. Slope is 3, which means for every 100 stocks in banknifty, trade 300 stocks in nifty. In futures lots, that translates to 3 lots of nifty (150 stocks) and 2 lots of banknifty (50 stocks).

Lets say we buy at the closing price of 7th January 2011 which is Rs. 5904 for NIFTY and Rs. 11053 for BANKNIFTY. We see that prices revert to mean after 7th January 2011 and if we close at our target of 0.5 standard deviation from mean, then that is reached on 24th January 2011. Price on that day is Rs 5743 for NIFTY and Rs. 11151 for BANKNIFTY. Our profit is (5904-5743)150 + (11151-11053)50 which is Rs 29050.

As a general rule, if pair is STOCK1-STOCK2, and entry divergence is negative then LONG STOCK2 - SHORT STOCK1. If entry divergence is positive, LONG STOCK1 - SHORT STOCK2.

You can employ your own strategy for closing trades like you close positions when the standardized error becomes zero i.e. prices revert to the mean exactly.

 Caveats

It may happen that pair of stocks you chose whose prices have diverged might not revert to mean because of a news flow or any other fundamental change in one of the stocks and the statistical relationship doesn’t hold for this pair of stocks anymore.

More links

Techpaisa Team.

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.