Pair Trading Lab: Ultimate Pair Trading Tools

Pair Trading Lab: Ultimate Pair Trading Tools

What Is Pairs Trading?

Pairs trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy.

The strategy monitors performance of two historically correlated securities. When the correlation between the two securities temporarily weakens, i.e. one stock moves up while the other moves down, the pairs trade would be to short the outperforming stock and to long the underperforming one, betting that the “spread” between the two would eventually converge. The divergence within a pair can be caused by temporary supply/demand changes, large buy/sell orders for one security, reaction for important news about one of the companies, and so on. Read more at Wikipedia.

Why Trade Pairs?

Thanks to market neutrality, this trading strategy can be very safe (if diversified) and immune to global market crisis, even when the entire market or sector falls down. If you trade enough pairs at the same time, your pair trading portfolio could perform well also in difficult market situations.

Let’s take a look on example: we take these two stocks – GlaxoSmithKline plc and Novartis AG. These are stocks of companies in the healthcare sector and their prices are quite correlated. Now, let’s make a backtest of difficult period of 2008-2009 where the stock market dropped a lot because of the crisis:

Backtest GSK vs NVS in period 2008-2009

As you can see, prices of both stocks dropped considerably in this period (i.e. NVS price dropped by terrifying 38%). But if you traded these stocks as a pair, you would gain amazing 125% of initial capital (considering 50% margin) with drawdown being just 9%, which is an excellent result for this difficult period!

How Does This Website Help You?

This website represents a complete set of tools you require to setup your own pair trading portfolio, all in one. You may use it to:

  • create backtests or studies of pairs – you can verify pair trading idea you actually have, inspect behavior and robustness of pairs
  • test pairs for cointegration online, analyze cointegration residuals
  • search our database of more than 10,000,000 pre-analyzed US market pairs using complex filters (including cointegration and profit measures)[1]
  • create and maintain lists of interesting pairs, rate them, give them tags
  • create, maintain and backtest portfolios of pair strategies[2]
  • execute your portfolios automatically, live, in real-time using our application PTL Trader[2]

[1] available to Premium Members only
[2] fully available to Premium Members, limits apply to regular users

Latest News

We are deeply sorry to inform you that premium subscription is no longer available to customers of the United Kingdom until further notice. Subscriptions already purchased before won’t be affected.

All credit card payments are now fully SCA/PSD2 compliant and processed by Stripe.

We regret to inform that after many years Google suddenly decided to close their public historical data API. This means that it is not possible to use non-US based equities anymore for back-testing. US stocks and ETFs (listed at NYSE, NASDAQ, NYSEARCA) are available without restrictions. We hope to replace Google with another provider in the future.

PTL Trader v1.5.0 has been just released, finally introducing the CFD support and fixing few issues. Changelog PTL Trader v1.4.0 has been just released, introducing full support for advanced Kalman-grid and Kalman-auto models. Changelog

In addition from Paypal, you may now purchase premium membership using credit cards directly.

Important: If you have problems retrieving correct and complete historical data or connecting to IB API (error 503), please upgrade your IB Gateway to recent version 960.2g or newer ASAP. Download PTL Trader v1.3.1 has been just released. It fixes important issues, upgrade is highly recommended. Changelog Today is the day! Celebrate our fifth bithday with us enjoying 20% discount and as a special gift for you we have prepared a free video tutorial demonstrating some of the new features: Watch on YouTube We are pleased to announce major upgrade to this website: there is a new FAQ page with PTL Trader related info, new Kalman-Auto model, advanced portfolio management features, historical versions of Pair Database ready to explore and much more. PTL Trader v1.3.0 has been just released. This version also finally runs on Linux and macOS! Changelog

PayPal payments are now finally available! More payment methods will follow.

We are happy to announce that a new pairs trading model, Kalman-Grid v2, is now available. This model brings superior performance of Kalman filter applied to pairs trading without any need to optimize sensitive parameters. More info We are pleased to announce interesting features and updates to this website. More info PTL Trader v1.2.4 has been just released. Changelog

Related Post

Be the first to comment

Leave a Reply

Your email address will not be published.


*