ASX Stock Pairs Trade Journal

[skc]

Sometimes the analyst up/downgrades really just like to kick you in the butt...

BLD/CSR got me good this week with a downgrade on BLD and upgrade on CSR
Then
CHC/DXS also got me with CHC downgraded while DXS had a positive note released

Yes I had BLD/CSR too and closed it on the BLD downgrade. Could have held the CSR short for the rest of the day much better than I did.

The overall impact of analyst changes are typically short term... but when you get double hit on both sides it hurts a lot!

I only have 3 small pairs now with Brexit, school holidays and REIT ex-div coming up.

 

[Freddy]

Here is a reply to my query re PTF and "after long weekend" problems:

We're testing our next product with the development team this week and next. Will get back to you asap.
Best
Paul
Pairtradefinder.com

Finally, something is happening. So will post updates as I receive.

 

[VSntchr]

Here is a reply to my query re PTF and "after long weekend" problems:

We're testing our next product with the development team this week and next. Will get back to you asap.
Best
Paul
Pairtradefinder.com

Finally, something is happening. So will post updates as I receive.

Keep us posted Fred!
I also have been in touch with them regarding a problem I have been having - hoping their updates can fix this too.

Anyone having much luck with the current environment? Ive had some very big swings going on and mostly in my favour
BTT for example was just a gift on the open. Massive spike! A bit weary trading this sector given the situation, but some research into geographical exposures can give a basic roadmap.
One more day for the financial year to get the equity curve point northeast!

 

[skc]

Anyone having much luck with the current environment? Ive had some very big swings going on and mostly in my favour
BTT for example was just a gift on the open. Massive spike! A bit weary trading this sector given the situation, but some research into geographical exposures can give a basic roadmap.
One more day for the financial year to get the equity curve point northeast!

I only have 2 small pairs on at the moment. The market is better for silly outright momentum trading imo.... so I've been focusing on that. I haven't tried to pair any stock with UK exposure at all.... as you say, big swings and I am not that confident that they'd all be in my favour.

I saw that BTT bot running wild this morning... I shorted it on the way up, when I saw HGG wasn't moving. Had to take some heat but was quite profitable in the end. Mean reversion rules!

 

[Freddy]

Latest from PTF after I asked if they are using my database for testing. Luckily, I found a 29 Dec 2015 that would have been corrupt due to Christmas.

Hi Leigh, yes we would soon be rolling out the latest version so you can use it. The more precise timeline I will let you know by next few hours. Will that be ok?

Fingers crossed.....

 

[edman79]

Yes I had BLD/CSR too and closed it on the BLD downgrade. Could have held the CSR short for the rest of the day much better than I did.

Hi SKC,
I think you've mentioned where you get your broker down/upgrade info before but to save half an hour searching can you remind me?

Cheers.

 

[skc]

Hi SKC,
I think you've mentioned where you get your broker down/upgrade info before but to save half an hour searching can you remind me?

Cheers.

FNArena subscription will get you the morning emails before open. There used to be a mid day free version which I don't think exist anymore.

Fin Review does spot mentions here and there.

 

[Freddy]

Latest from PTF.

"We should have v3.27, a debugged and streamlined version of the current app, ready in the next week. We are looking at launching PTF Pro in October." That was dated 26 July 2016.

 

[VSntchr]

Latest from PTF.

"We should have v3.27, a debugged and streamlined version of the current app, ready in the next week. We are looking at launching PTF Pro in October." That was dated 26 July 2016.

Interesting. My data still having massive issues so hopefully this is fixed in the update...
I wont be subscribing to PRO unless I see some substantial improvements in either support function or an outright fix.

 

[Freddy]

Interesting. My data still having massive issues so hopefully this is fixed in the update...
I wont be subscribing to PRO unless I see some substantial improvements in either support function or an outright fix.

Here is the latest from PairTradeFinder:

----------------------------
Yes, the PTF Pro will be a new product.
Yes, you will be eligible for upgrade/ bug fixes with your current life time license.

Some of the feature for PTF Pro are:
Among many improvements to the user interface and experience, backtester accuracy, and reporting statistics - will also include an integration with Interactive Brokers' IB Gateway for data and Trader Workstation for semi-automatic trading. If you open an account at Interactive Brokers through us and integrate PTF Pro with that account, you should be able to get historic and real-time NSE and Bombay data for use in PTF Pro.
----------------------------
Vsntchr - if you have bugs you can identify, please send details and error log to support@pairtradefinder.com

 

[VSntchr]

Thanks Freddy. Although I think my problem is external to PTF.
I have realised that when PTF stops importing data, that I simultaneously cannot access finance.yahoo.com - which is where the data is pulled from.
I can access au.finance.com - so I think the problem is that Yahoo7 (the Australian version of yahoo) is blocking access to the US version, thus causing me data problems. I cannot fathom that I am the only user having this issue, although it seems that way

 

[Freddy]

Thanks Freddy. Although I think my problem is external to PTF.
I have realised that when PTF stops importing data, that I simultaneously cannot access finance.yahoo.com - which is where the data is pulled from.
I can access au.finance.com - so I think the problem is that Yahoo7 (the Australian version of yahoo) is blocking access to the US version, thus causing me data problems. I cannot fathom that I am the only user having this issue, although it seems that way

I have forwarded this to my contact at PTF. Here's hoping he has a solution for you.

 

[KAO]

Like several others over the past few years, I've just spent the past couple of weeks working through this thread in it's entirety. I've been slowly pulling together a pairs system for the past few months and it's a treasure trove of meaningful implementation advice that's not readily covered in the literature.

Massive respect to you guys who have taken the time to post and answer questions here, particularly skc, SilverRanger and VSntchr

I'm down to implementation now and wondered if any of you could offer guidance on the following things:

1. Technical - When your systems trigger a trade based on the BB/Z-Score/Ratio indicators, but the price series has actually converged, do you take the trade betting on divergence, or do you skip it? For example...

View attachment 68223

... Here you can see that the 21 day Z-Score has blown out to 2.3, but the actual spread of the price series has converged to 0.28. In this scenario would you short BWP (Blue) long CQR (Red) regardless, or call it a spurious signal?

2. Fundamental - I'm curious about the limits of what you guys would consider valid fundamental linkage (forgetting Cap., P/E, P/B etc., just talking about core business activities), for example...

2.1. SLK / SGR - Both consumer discretionary, both heavily tied to tourism etc., but clearly not as good a pair as something like SKC / SGR.

2.2. ARF / AOG - ARF hold child care and AOG retirement villages. By the numbers they cointegrate nicely at 99% with a half life of 13.9, correlation of 0.91 and the time series match up reasonably enough, but is the fundamental business enough to keep you away?

2.3. FET / Everything - Another good example like 2.2 is FET versus everything, where it cointegrates nicely with a number of office, retail and industrial REITs, but has a core business around child care facilities.

2.4. BWP / Everything - Similar to above.

Any feedback you guys have would be awesome.

 

[skc]

Like several others over the past few years, I've just spent the past couple of weeks working through this thread in it's entirety. I've been slowly pulling together a pairs system for the past few months and it's a treasure trove of meaningful implementation advice that's not readily covered in the literature.

Massive respect to you guys who have taken the time to post and answer questions here, particularly skc, SilverRanger and VSntchr

KAO... welcome to the thread and the forum. Answers below in blue.

I'm down to implementation now and wondered if any of you could offer guidance on the following things:

1. Technical - When your systems trigger a trade based on the BB/Z-Score/Ratio indicators, but the price series has actually converged, do you take the trade betting on divergence, or do you skip it? For example...

... Here you can see that the 21 day Z-Score has blown out to 2.3, but the actual spread of the price series has converged to 0.28. In this scenario would you short BWP (Blue) long CQR (Red) regardless, or call it a spurious signal?

The attachment didn't show probably but I am going to guess what you are asking...The Z-score is the only number that PTF uses to generate a signal, but it certainly doesn't mean it should be the only criteria (criterion?) for you in your trade decisions. One number you should always check is the profit potential... i.e. what profit (in % terms) can be achieved if the Z-score was to mean-reverse? This will vary depending on the pair's volatility. But if it's too small then it may not be a trade worth taking.

2. Fundamental - I'm curious about the limits of what you guys would consider valid fundamental linkage (forgetting Cap., P/E, P/B etc., just talking about core business activities), for example...

2.1. SLK / SGR - Both consumer discretionary, both heavily tied to tourism etc., but clearly not as good a pair as something like SKC / SGR.

Not a pair I'd trade. Tourism seems to be a decent enough common driver, but I won't trade it because the vastly different size and liquidity of the 2 stocks

2.2. ARF / AOG - ARF hold child care and AOG retirement villages. By the numbers they cointegrate nicely at 99% with a half life of 13.9, correlation of 0.91 and the time series match up reasonably enough, but is the fundamental business enough to keep you away?

Again not something I monitor because ARF/AOG's borrow availability aren't always there for me. Childcare is always a regulatory risk but the stats from what you've said sounds OK.

2.3. FET / Everything - Another good example like 2.2 is FET versus everything, where it cointegrates nicely with a number of office, retail and industrial REITs, but has a core business around child care facilities.

As above

2.4. BWP / Everything - Similar to above.

I have traded this a lot with other REITs, but not since the recent news about several Bunnings closures.

FWIW, I tend to stick with the larger REITs which have good liquidity and viewed by the market as yield play with low earnings volatility. There are many second tier names in REITs and they all have slightly higher risks due to sector concentration, lack of liquidity, lack of shorts, asset concentration risks etc. And because they are in the second tier they often aren't as responsive as the major REITs in terms of interest rate expectations.

Having said all that, your pairs trading will evolve continuously, adding new pairs, new entry criteria, discovering new niche etc. May be there's a good niche in the second tier REITs for the sole reason that not too many people are looking.

Start your new pairs short, get to know it's traits, click through it's report in reporting seasons and expand your trade candidates Ask questions here but ultimately own your own pairs database and trades.

Any feedback you guys have would be awesome.

Best of luck with your pairs adventure.

 

[VSntchr]

Did anyone else get the "valued member" email offering the new version at "no cost"?
Obviously this offer could come in any shape or form - but right now if I had have bought into their last offer (buy another license to get 50% off the new version)...id be feeling a bit cranky.

As someone who didn't take up that offer, I hope this offer is completely free

I actually just updated yesterday to the v3.27 from v3.25. It did't really offer much difference other than some GUI changes as far as I can see.
I am quite interested to see what the new version offers that is giving "much more profitable back test results". I always thought that if the backtester was more realistic it would become less profitable due to some of the big backtest profits coming from divs not being accounted for, staggered open causing closes at yesterdays prices for one leg etc.

On a slightly unrelated note, I am looking at getting an IQ Feed subscription set up which will allow me to get LIVE prices for LSE stocks into PTF. PTF provides a discount for the first 3 months of 50% off.

 

[Sir Burr]

Did anyone else get the "valued member" email offering the new version at "no cost"

No not "no cost" but $99 for a limited time offer!

I bought it ages ago and gave it away (the pairs idea). Can't remember why, maybe just shorting too hard or whatever.

 

[VSntchr]

Did anyone else get the "valued member" email offering the new version at "no cost"?
Obviously this offer could come in any shape or form - but right now if I had have bought into their last offer (buy another license to get 50% off the new version)...id be feeling a bit cranky.
.

So the much waited for email came through yesterday - although in true PTF fashion it wasnt just one email, rather it was a blast of emails within an hour.
I thought Jarred had sold the business? But he was narrating the video?
The video was basically just a sales pitch for IGmarkets - nothing was mentioned relating to improvements to the software and how they are justifying the "improved backtests" ????

Receivers of the email are allegedly 'special members' meaning that we are already paid license holders - so why would we need access to existing software that we already have access too??? I don't think they are respecting the intelligence of their customer base.

Maybe I am just a bit jaded as my issues have never been resolved by the support team...unlike what the video suggests.

Aren't we supposed to have a PRO version on the way?

 

[Sir Burr]

Strange, I only received one email and for fun watched the video.

Maybe I missed it but I heard nothing about IG Markets and he went through the list of improvements and bug fixes.

Your post makes me wonder if we are talking about the same software.

Also see I'm a "valued member" too so guess we would/should have received the same email. Actually, you can see here the video I watched:

http://special.pairtradefinder.com/upgrade/

 

[VSntchr]

Strange, I only received one email and for fun watched the video.

Maybe I missed it but I heard nothing about IG Markets and he went through the list of improvements and bug fixes.

Your post makes me wonder if we are talking about the same software.

Also see I'm a "valued member" too so guess we would/should have received the same email. Actually, you can see here the video I watched:

http://special.pairtradefinder.com/upgrade/

Okay yep, different video!
I saw this video: http://special.pairtradefinder.com/offer/

I retract some of my statements above based on this! My apologies. However, it doesnt change the fact that support has been weak and the program is still very laggy for me.

 

[Sir Burr]

Okay yep, different video!
I saw this video: http://special.pairtradefinder.com/offer/

I retract some of my statements above based on this! My apologies. However, it doesnt change the fact that support has been weak and the program is still very laggy for me.

Ahhh I see what you mean about IG Markets.

Yeah at the time I used it, found the same as you and tried having it coded into Amibroker but gave that idea away. Too hard