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Statistical Arbing

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ilovethisforum
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« on: November 05, 2015, 02:42:06 PM »

Hi to all of you fellow arbers!I am new to the stock market,i have read some books about value investing.I recently found the terms "statistical arbitrage" and "merger arbitrage".I wonder if someone in this forum have try that and can tell us about his/her experience.Thanks!
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davidelliott52
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« Reply #1 on: November 07, 2015, 01:29:10 PM »

merger arbritage is when a hedgefund buys and sells stock in two merging companies, the uncertainty that the merge will be completed means that the two individual companies will trade at a discount to when the merge is complete (very risky business and I wouldnt even consider it.) statistical arbitrage is just pair trading and nothing more. If you google pairs trading and ignore merger arbitrage then you will get more info than I can explain. Pairs trading is something ive used in the past with a slight modification. I will piack a sector I like and find the best 5 value companies in that sector, I will go long on all of those and then I will find the worst 5 value companies and go short to the same value. If the market or sector goes up or down the hope is the 5 better value companies will outperform the worst 5. Simple strategy but quite difficult to find those companies and how to value them as over and underpriced but it can be done. Nothing beats long term holdings though. Instead of pairs trading I tend to buy defensive stocks in the summer and short more aggressive high risk things then in the winter go a bit more high risk and remove shorts and that has worked quite well for me.
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ilovethisforum
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« Reply #2 on: November 11, 2015, 12:41:03 PM »

Thanks for you answer!So have ever try pair trading?I am new to stock market i am eager to learn more about it.I am also long term.
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