Correlated Stocks?

Discussion in 'Trading' started by Pa(b)st Prime, Jun 8, 2008.

  1. Does anyone know of a technical service that will scan stocks of like industries for correlation. IOW's if you're long XYZ can you tell me what other stocks trade at a high serial correlation to XYZ? I can do it manually by picking what I think are poss candidates but obviously there's too big a universe out there to just randomly search.
  2. Now for the dumb question. Why do you look for a correlating stock, is it for risk management, or some other terribly obvious reason that I don't understand?
  3. Arnie


  4. It's a technique called "pairs trading". Go long with the stronger of the pair and short the other.