Ok! Gloves off! Correlation, as often experienced in the market, has a temporal lag to it. Not in a million years. We have analyzed Bid/Ask data for over 1000 stocks on 10 years of data. There is no tradable lag! Illusion, my friend! Often when you run macro analysis you find things to be highly correlated in the same time period, yet on the micro scale you will find that one stock is the leader in any movement. This temporal lag is in most cases the result of pair traders, and could even be considered a self fulfilling prophecy of pair trading. Either way, it still presents one way to capture micro anomalies in the market. We have analyzed time intervals from 1 second to 1 week. No tradable time shifts were found! There were occasional anomalies but nothing tradable! On the simplest level, if you are trading a company like MWD, I fail to see how watching and gaining information from MER, GS and LEH is going to be a detriment. More information is always a positive. You can watch anything you like, but only in case of a time sequence your observations are valuable! Meaning if you can not find a case like "If I see $0.1 gain on stock A then stock B will gain $0.2" then you have no additional information therefore your decision is independent on your observations! And because those kind of predicates don't exist due to the market efficiency pair trading is a sexy bullshit and nothing else!