i would put it this way-you can pair whatever you want, as long as you have plan how to trade a pair. if you want to be in semiconductors field-try to chart a pair way i did, and go, where you find maximum crossovers, not a trends. BTW-i check all of them-there is no good pairs(by my opinion) in semis. even LLTC-MXIM looks sux Thank you!
that mean, if you on wrong side-you will never get out))))) same like-short market in 2000)))))))) after all you may try to short stocks with bad fundamentals against stock with good fundamentals or if you may try to pick direction of the market and short biggest gainer in last run and long underperformer or you if you think, market will go down-short stocks with higher beta and so on... the list will newer end................))))))))))that the problem
I am not trading stocks and don't care abou fundamentals. Trading only futures with high correlation (>0.90) and if possible low margins plus low trade commission. Like today we had T-Bonds (long) climbing faster then 10 Y TNotes (short) making $ 750, which is also the risk. If these contracts are to big, try corn/wheat or Beans/Corn. It has nothing to do with seasonal or fundamental, just statistical apprach as mentioned earlier. Reagrds, Gann
Trading 1 t-bond against 1 10 year has a directional bias, as the two have different dollar volatilities. Therefore you will almost always have a winning trade if the t-bond leg is profitable, which kind of defeats the purpose of a spread. By memory, I think a ratio of about 2 bonds : 3 notes is market neutral. Are you just fading the curve when it moves sharply?
According to my calculations these are the most correlated stocks with KLAC within S&P 500 : MKSI BBY EV USIA CAT AKS WHR URI TGT SWK CD Al
Yipes. Kla tencor and Target pair. Do you have anyway of correlating KLAC with just the other semi's Neutral Al. That might be the better route (not crossing sectors). If you can do that I woul dbe interested in what comes up. NVLS, MXIM my guess. Anyone that tries pairs trading Target and Klac is gonna feel some major pain the day the retail sales suck and Joe Osha or somebody decides the semi's are cheap. "Neutral Al" your username reminds me of that old statistics joke, a statistician can have his head in an oven and his feet in ice, and he will say that on average he feels fine. Cheers.
a time series study on the top 44% representation of the QQQ's might expose which stock is highly correlated. however, I will suggest that the correlation might be coincidental instead of fundamental. http://www.nasdaq.com/asp/indexshares.asp?symbol=qqq