Friday, August 28, 2009

What's Working in Pairs?

Professional traders are always asking their trade candidates "What have you done for me lately?" The same can be said of their prospective stock and ETF pairings (more background reading here).

When it comes to trading pairs, inter-market relationships are often ephemeral according to current economic themes and collective trader focus. Therefore, it is important to periodically run comparative rolling profitability analyses for each prospect.

In that regard, below are six-month, simple returns for twelve major ETF sector candidates (upper-right where +1.0 = +100% return). The bottom-left intersecting cells measure the linearity of the hypothetical return series referred to above.

During the course of this recent rally, it's plain to see how pairs based on the strongly moving and volatile financial service sector have predominated the leader-board.

ETF Rewind Pro allows subscribers to run custom back test reports optimized for either profits or linearity (or both!) of returns just like this, including current trade signals for up to 780 pairs candidates at a time. What have your trade candidates done for you lately?

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