| Pairs
Trade |
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The strategy of matching a long position with a short position in
two stocks in the exact same sector. This creates a hedge against
the sector and the overall market that the two stocks are in. The
hedge created means that you are placing a bet on the two stocks,
the stock you are long in vs. the stock that you are short in.
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It's
the ultimate strategy for stock pickers, because stock picking is
all that counts, what the actual market does won't matter (much).
If
the market or the sector moves in one direction or the other, the
gain on the long stock is offset by a loss on the short. |
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