Pair's Trading Update

As we had mentioned in our last pair’s trading update, we had miscalculated on the appropriate weighting and suffered unwanted volatility in the portfolio when the market initially sold off on September 9^th (Making Adjustments To Our Pair's Trading Model). Since making the adjustments we have seen an improvement in both portfolio volatility and returns.

Roughly two-thirds of our pair’s trades are profitable (15 out of 24) with an average holding period of 17 days. The average return per trade is -0.02% but this is largely due to a few trades that we didn’t weight appropriately. While many of the misallocated pairs have been closed, there are a handful that we are still working. Our total portfolio is down 2.9% over the past month. Since we reconfigured the model, we are profitable 7 out of our last 7 trades.

We are pleased to see the z-score relative price performance model starting to bear fruit.

Long XHS / Short SPY

Long XLP / Short SPY

Long VOO / Short XLK

Long XLV / Short SPY

Long XLU / Short SPY

Long VOO / Short XLF

Long XLY / Short XLF

Long XLY / Short XLK

Long XLY / Short SPY

Long XLB / Short XLF

Long XLV / Short XLK

Joseph S. Kalinowski, CFA

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This analysis should not be considered investment advice and may not be suitable for the readers’ portfolio. This analysis has been written without consideration to the readers’ risk and return profile nor has the readers’ liquidity needs, time horizon, tax circumstances or unique preferences been taken into account. Any purchase or sale activity in any securities or other instrument should be based upon the readers’ own analysis and conclusions. Past performance is not indicative of future results.