ASX Stock Pairs Trade Journal

[Pairs Trader]

Come on Pairs read your pm's.

I'm still unable to work with the latest version as it rejects my email.

Ive replied to you.

Can I please ask members who have questions un-related to this journal please send us an email instead of PM, as we are on the emails all day and the ASF PM system doesn't have an alert function.

 

[skc]

New trade

Long ABB @ 9.04
Short CSR @ 1.76

I think ABB is the subject of corporate activity - it is due to merge with Canada's Viterra group. Not sure about the nature of the deal, but definitely sure that ABB is no longer moving "naturally".

 

[awg]

I think ABB is the subject of corporate activity - it is due to merge with Canada's Viterra group. Not sure about the nature of the deal, but definitely sure that ABB is no longer moving "naturally".

ABB is subject to a merger with Vitera at $9.40, so at least that half of the pair is on potentially the correct side of the equation

 

[Pairs Trader]

New trade

Long TOL @ 6.20
Short JHX @ 4.62

 

[skc]

New trade

Long TOL @ 6.20
Short JHX @ 4.62

PT,

JHX spiked up today and I got quite few signals to short it along with other building materials stock (e.g. GWT, CSR, FBU). TOL seems an odd choice. Any comments?

This lead me to the next question.

Do you keep each share with a single, unique pair? i.e. Do you only have JHX with TOL in your program, or JHX with a range of other shares that fit your criteria?

 

[Pairs Trader]

skc, I let you in on a little secret of mine I have every stock in the ASX100 paired with the ^AXJO which is the ASX200 cash index, periodically throughout the day I will rank by the +/- column and look for stocks that are -2 or +2 against the index, if I find 2 stocks where one is overbought and the other oversold and they are in the same sector il backtest them to see if the pair history is profitable and if so pair them up and make a trade, a like this situation because both stocks are out of whack with the market and generally when you pair them together the +/- is above/below 2.50, in JHX/TOL case it is 2.83, the best trade you can have is when a pair is more than 3stdev from its mean on no news.

 

[Pairs Trader]

Guys, if there are any questions regarding IGmarkets trading accounts please PM me and I will respond immediately, I want to keep this journal strictly for posting and discussing pair trades.

Thankyou.

 

[Pairs Trader]

New trade

Long WDC @ 11.27
Short JBH @ 16.55

 

[Pairs Trader]

Closed trade for profits

Sold APN @ 1.61 (8.78% profit)
Covered FXJ @ 1.355 (5.03% loss)

Ive only had 1 loss in the last 14 closed trades.

Account is up over 60% since starting this journal in March.

 

[johnnyg]

JBH and HVN looks to of had a big deviation, and from the closes today are starting to head back?

 

[skc]

JBH and HVN looks to of had a big deviation, and from the closes today are starting to head back?

You want to trade stocks when there are no news. HVN reported disappointing sales, so the deviation is not statistical but more fundamental.

 

[Pairs Trader]

spot on skc

 

[johnnyg]

Ah cheers for pointing that out. Wasn't aware there was news out, just browsing threw the charts.

 

[gemtrawler]

Pairs Trader

can I ask you what happens during reporting seasons when 2 stocks that have shown a strong past correlation report 2 different results - one surprisingly good - one surprisingly bad.

does that throw the past correlations out the window?


Also what net profit result do you hope to achieve based on a $20 k trade - i.e.e $10 k long and $10 k short pair.,, after all fees and what have you been netting on an average trade in this present exercise/demonstration ?

 

[samgribbles]

long AIX at 1.40
short MAP at 2.51

 

[awg]

One thing you do have to be very careful, is to at least check the ASX website for past dividend dates, before you place your trades, as they will whack you.

Profit guidance announcements can as well.

The worst thing is if A takes over B, and you are on the wrong side.

You still have to do your research

 

[skc]

long AIX at 1.40
short MAP at 2.51

Mate... the major Macquarie stable of funds are going a bit gaga recently. Look at MIG's range!

MAP is now halted. I hope it works out for your sake.

Like awg says, you really want to know the companies quite well so you don't step into a dude pair.

 

[samgribbles]

rationale for the trade was
- high correlation between the two
- GSJBW favour AIX over MAP and suggest switching from MAP into AIX
- GSJBW TP for MAP = $2.67 = 6% upside from $2.51
- GSJBW TP for AIX = $1.82 = 30% upside from $1.40
- MAP stronger than AIX lately, met PT's SD criteria
- MAP up 9.5% today, AIX up 2.5%
=> entered to catch a few % pullback on MAP

if there are signs that this was a trade not to be entered what were they?

 

[skc]

rationale for the trade was
- high correlation between the two
- GSJBW favour AIX over MAP and suggest switching from MAP into AIX
- GSJBW TP for MAP = $2.67 = 6% upside from $2.51
- GSJBW TP for AIX = $1.82 = 30% upside from $1.40
- MAP stronger than AIX lately, met PT's SD criteria
- MAP up 9.5% today, AIX up 2.5%
=> entered to catch a few % pullback on MAP

if there are signs that this was a trade not to be entered what were they?

The sign was that there is a buzz on MIG about internalisation / privatisation / takeover etc. And MAP moved in tune as a result. It was just a risk in my view as to what might happen given the uncertainty.

A re-valuation of MAP will pull AIX up as well no doubt. So the trade might work out for you. I am just too risk adverse to take it. Good luck.

 

[samgribbles]

Thanks.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAJudd8sJv_E

Its just MQG and MAP in a halt. Should just be formal announcment of the Japan Airport sale being finalised (19.9% held by MAP and MQG)? We shall see