My group does equity pairs trading using a stat arb strategy. We are however, intraday only. Without delving into details, we have 6 strategies, which differ with respect to various parameters. Conventional wisdom dictates that if stocks A and B are correlated, a mean reversion strategy should be profitable on a fairly consistent basis. However, over the past 2 weeks or so we've been doing very well in agricultural pairs (CF-POT, POT-MOS, CF-AGU, CF-MON, etc.,) and getting crushed in industrials and natural gas pairs. All of these pairs have been moving in the same direction, especially since the market has been taking a brutal beating, and the S&P 500 stocks are virtually all moving down, but I can't figure out why pairs in those sectors are doing so much worse than agriculture. I don't quite know how to get to the bottom of this, so any advice would be greatly appreciated. Doing a cointegration test would probably be useless since we're intraday only.
Last edited by chicagokid
on August 3rd, 2011, 10:00 pm, edited 1 time in total.