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WINNING

Pairs

Relative value: long laggard vs leader in correlated pairs

Pairs Trader

3Y
Total Return
+38.4%
3Y
Sharpe Ratio
1.02
3Y
Max Drawdown
-8.2%
3Y
Win Rate
55.9%
3Y
Alpha
-11.6%
3Y
Comp. Score *
0.12
Risk Parameters
Max Allocation13.5%
Stop Loss10.0%
Take Profit5.0%
Max DD Tolerance8.2%
Rebalanceweekly
Execution Guidance
Order TypeLimit
Entry RuleEnter when Z-score exceeds 2.0. Exit when Z returns to 0.
TimingWAIT FOR SIGNAL: Only enter when price spread between paired stocks reaches extreme levels. *
ScalingFull position at entry. No scaling — it's a convergence trade.
Positions — Vol-Adjusted Sizing
SymbolActionVol Stop LossTake ProfitSizeLinks
KO BUY 16% 6.9% below entry 3.4% above entry 19.6% TVYH
PEP BUY 21% 8.7% below entry 4.3% above entry 15.5% TVYH
XOM BUY 24% 9.9% below entry 4.9% above entry 13.6% TVYH
CVX BUY 23% 9.8% below entry 4.9% above entry 13.7% TVYH
GOOGL BUY 30% 12.6% below entry 6.3% above entry 10.7% TVYH
META BUY 36% 15.2% below entry 7.6% above entry 8.9% TVYH
JPM BUY 25% 10.7% below entry 5.3% above entry 12.6% TVYH
BAC BUY 26% 10.8% below entry 5.4% above entry 12.5% TVYH
▶ For Passive Investors (Buy & Hold)

This strategy has moderate long-term potential but requires monitoring. - Take profit: Rebalance when any position exceeds 2x its target weight. Trim back to target, redeploy to underweight positions. - Stop loss: NO price-based stop loss. This strategy recovered from -21% drawdown to return 100% long-term. - Exit rule: Exit when spread Z-score returns to 0. The convergence trade is done.

Avg 5Y Return
45.1%
Avg 5Y Sharpe
0.41
10Y Return
100.0%
10Y Sharpe
0.36
HODL Composite
0.35
Consistency
89%
Suitable for passive
No