Pair Trading — bpleone / trade

Pairs Tracked

128

Above |Z| 2.0

actionable

Strategy YTD

+22.4%

Sharpe 2.42

Hit Rate

68.4%

avg hold 8.4d

🎯 Top Diverged Pairs (Z-Score Sorted)

#	Long	Short	Sector	Correl (60d)	Coint p-val	Z-Score	Half-Life	Action
1	META	GOOGL	Comm Svc	0.84	0.012	-2.84	6.2d	LONG META / SHORT GOOGL
2	AMD	INTC	Tech	0.78	0.018	-2.62	8.4d	LONG AMD / SHORT INTC
3	XOM	CVX	Energy	0.92	0.004	+2.42	5.8d	SHORT XOM / LONG CVX
4	JPM	BAC	Financials	0.88	0.008	-2.38	7.2d	LONG JPM / SHORT BAC
5	UBER	LYFT	Comm Svc	0.82	0.024	+2.28	9.4d	SHORT UBER / LONG LYFT
6	KO	PEP	Cons Stpl	0.78	0.032	-2.12	11.2d	LONG KO / SHORT PEP
7	V	MA	Financials	0.94	0.002	+2.08	4.2d	SHORT V / LONG MA
8	HD	LOW	Cons Disc	0.86	0.014	-1.92	8.8d	LONG HD / SHORT LOW
9	CRM	NOW	Tech	0.81	0.028	+1.84	9.8d	SHORT CRM / LONG NOW
10	DKNG	PENN	Cons Disc	0.74	0.042	-1.72	12.4d	LONG DKNG / SHORT PENN

📊 Featured: META / GOOGL · Z-Score Time Series

Spread = log(META) - β·log(GOOGL), β=1.18

Spread is 2.84 standard deviations below mean. Cointegration p-value 0.012 (statistically significant). Half-life of mean reversion: 6.2 days. Setup: long META vs short GOOGL, equal dollar-neutral notional. Exit when |Z| < 0.5 or after 14 days, stop on |Z| > 3.5.

📋 Trade Card

Long Leg	META @ $587.42
Short Leg	GOOGL @ $178.32
Hedge Ratio (β)	1.18 GOOGL / META
Notional / leg	$50,000
Shares (Long)	85 META
Shares (Short)	331 GOOGL
Expected Move	+$4,200
Max Risk (3σ)	-$1,800
R:R	2.33 : 1
Beta-Neutral	✓
Dollar-Neutral	✓

🎓 Method · How Pair Trading Works

1. Find Cointegration

Two stocks "move together" structurally — common business model, sector, customer base. Engle-Granger test gives a p-value; below 0.05 = statistically cointegrated.

2. Compute Spread Z-Score

Z = (current spread − mean spread) / stdev. |Z| > 2 means the pair has diverged into actionable territory. Mean reversion is the bet.

3. Trade Dollar-Neutral

Long the underperforming leg, short the outperformer, equal dollar amounts. Profit when the spread reverts. Half-life tells you the expected holding period.