HI , 1>)I am new to pairs trading and I have question how to determine how many stock to go long and how many to go short, if the beta of regression is for example 1.57 with forced zero intercept. One approach is go Long 1 Stock a short 1.67 of other stock.Second approach is to calculate the value of stock. So for example if stock A trades at 100 USD, and stock B at 5 USD then 1*100 Long Stock A(100*1.67)/5 Short Stock BWhat is the correct approach to that ? I am very confused..2>)Second question is , if I should use intercept in the regression?3>) What should be the optimal entry/exit point/stoploss ? 2SD/1SD/3SD or 1SD/0/2SDRegardsMike

Hmmm....Interesting Concept