Pairs Trading: What Is That?

Quite a few companies are involved in "pairs trading" get and we thought
we might just take a moment to explain what the term means.
Pairs trading means that while you go long a stock in a sector
and you're short one. At first glance you might think, "why
would anyone do that? "Well, for a few reasons.

First, in just about every sector there are a few leaders and everyone
otherwise a laggard. For example, in the tech field, IBM consistently
surpassing others, in general. In the financial sector, GS can rack up points
better than most. So, leaning long the leaders when the time is ripe
you pay often generous.

Also, some companies often produce even more good news than others. Some
is "produced" and some of it is real, but the street tends to pay
attention to the news generators and they often push them higher. So if
long a stock you put out good news to go, while short
their competition, you will often see something like this happens:

The stock put out the good news attracts higher the sector. However, in one day
or two, the others in the sector often fall back while starting the news
generator means, or even continues to rise. If you are long the stock news,
and short the weakest competitor in the sector, it is likely that both
will win plays.

This is not a new concept, but one that lost peace in the 90s, as everyone
just went long. Now it is the idea of ​​the pairs trading to turn again and
it's worth doing some homework on it as it sounds intriguing to you.