Pairs trading.

Pairs trading is suitable investing strategy at the time like right now. Going long with the stock which you consider as a better one in the pair and going short with worse company. Environment of high volatility. You don't really know if market will continue rebound rally or will retest bear market lows.

I have prepared some stocks pair with analysis since 20th Novemeber. More or less 6 month period and most of the stocks have bottomed this day.


1. Amazon (AMZN) vs Ebay (EBAY).

Amazon continues with posting better than expected results even in the tough times of recession. On the other side Ebay's core auction business has been decelerating. Therefore you would gain 135% on Amazon bull run and lost around 43% in Ebay's share price gain. Altogether profit 92%.

Last month Ebay declares strong rally and shares growing double times more than Amazon. It seems like very low valuation attracts more buyers even though there is no fundamental improvement in Ebay strategy.




2. Toyota Motors (TM) vs. General Motors (GM).

Automotive industry has offered quite easy money in terms of pairs trading. Still declining US car makers vs. growing dominance of Toyota accelerated in times of global economic recession. Long position in Toyota grew by 35% and short position in General Motors provided 39%. In total 74%




3. Google (GOOG) vs. Yahoo (YHOO).

To be honest here I would be losing. Still growing market share for Google vs. smaller share for Yahoo. Long position in Google +39% vs. loss of 61% in Yahoo short position. Altogether loss of 22%.

Here I see as an explanation that Yahoo shares were so much punished after no deal with Microsoft (MSFT) that simple they were cheaper than Google.





You can also check out my articles about chip makers pairs trading or trading pairs with ETF.