Tag Archives: Cointegration

Pairs Trading Half-Life: What 1,185 Pairs Taught Us

October 17, 2026 1:51 pm |

What is a pairs trading half-life?

When two related stocks drift apart, a pairs trader bets that the gap will close. The pairs trading half-life measures how long that usually takes. In other words, it is the number of days the pair needs, on average, to close half of the gap. A short half-life means the pair snaps back quickly, so your capital is tied up for days. A long one means a slow recovery and a long wait for your profit.

Our April post proposed a screen built on this measure.

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The 3 “Best” Stock Pairs to Trade — That All Lose Money (Tested)

September 20, 2026 11:32 am |
famous stock pairs to trade backtest — KO/PEP, MA/V, TGT/WMT losses vs HGV/MGM winnerFive-year backtest, identical settings: the three textbook pairs all lost; HGV/MGM went nine for nine.

Ask anyone which stock pairs to trade and you’ll hear the same three names: Coke and Pepsi. Visa and Mastercard. Target and Walmart. They’re in every textbook, every YouTube video, every forum thread. Famous companies, obvious rivals, surely perfect pairs.

I ran all three through a five-year backtest last week. Every one of them lost money.

This isn’t a trick. Same settings for every test, disclosed in full below, straight out of our software. And the punchline isn’t that pairs trading doesn’t work.

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Pairs Trading Example: The Vegas Pair That Kept Paying for 5 Years

September 13, 2026 1:35 pm |

Want a real pairs trading example instead of theory? Here’s one straight from our platform: Hilton Grand Vacations (HGV) and MGM Resorts (MGM). Two Las Vegas-rooted leisure stocks. One quietly reliable trading relationship.

The numbers: 12 trades, 12 winners

We ran a 5-year end-of-day backtest at $5,000 per leg. The results speak plainly:

  • 12 completed trades — every one profitable
  • Net profit: $3,122 after $258 in commissions
  • Average profit per trade: $260
  • Maximum drawdown: just 4.02%

The equity curve is a staircase, not a rollercoaster.

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Market-Neutral Pair Trading in Action: May 2026 Top 50 USA Stock Pair Stars

May 11, 2026 4:52 pm |
market-neutral pair trading

Most retail trading strategies depend on direction — and direction is the one thing nobody can predict consistently. By contrast, market-neutral pair trading offers an alternative: trades constructed not on whether a market rises or falls, but on the relationship between two fundamentally related assets. As a result, when that relationship temporarily diverges, mean reversion offers a measurable, repeatable edge.

Your Shortcut to Market-Neutral Pair Trading Success

This May, after another quarter of research, recalibration, and statistical validation, we are releasing the May 2026 Vintage of our Top 50 USA Stock Pair Stars.

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OU Half-Life Filter for Pair Trading

April 26, 2026 9:52 am |
Faster Reversion = Better Profits in PairTrade Finder® UA3

One of the biggest hidden risks in pair trading isn’t finding a cointegrated relationship. It’s trading a pair that reverts too slowly to be profitable before costs, time decay, or market drift eat your edge.

That’s exactly why we’re adding the OU Half-Life Filter to PairTrade Finder® Ultimate Alpha 3. It’s a simple, powerful new layer that tells you how fast a spread will snap back — so you only trade the pairs that can actually make money in real-market conditions.

OU Half-Life Filtering in Pair Trading

Why Many Pairs Fail in Live Trading (Even If They Pass Backtests)

You run the scanner.

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Kalman Filters vs. PairTrade Finder®

March 26, 2026 3:38 pm |
Why We Keep It Simple (On Purpose) Kalman filters

From time to time, experienced traders reach out and ask:

“Why doesn’t PairTrade Finder® use a Kalman filter to calculate dynamic hedge ratios?”

It’s a fair question. Kalman filters are widely used in quantitative finance and are often presented as a more advanced way to trade pairs.

So this post explains our thinking clearly.

PairTrade Finder® is designed to capture most of the statistical edge—without the complexity that often reduces real-world performance.

In practice, as a rule we seek to target a platform that delivers 80% of the benefit of institutional grade models with around 20% of the complexity.

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The Stock Pair Trading Strategy and the Secret of Cointegration

April 12, 2020 9:39 am |

Learn one of the best-kept hedge fund secrets for deploying the stock pair trading strategy – cointegration.  Used by professionals for over 50 years to deliver consistent monthly profits from stock trading, regardless of market direction. It also carries the additional benefit of protection from market crashes and big account drawdowns through the use of hedging.

Click here to watch our video that explains it all:

stock pair trading strategy

Combining Cointegration and Stock Pair Trading for a Winning Combination

Professional traders and hedge fund managers love to use the stock pair trading strategy.  

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