Tag Archives: Pairs Trading

Pair Trading Strategy Enhancement

April 10, 2026 12:11 pm |
Go Hybrid: Mean-Reversion Framework PLUS Technical Bias Filtering pair trading strategy enhancement

Pairs trading remains one of the most widely used market-neutral strategies, built on the principle of exploiting mean reversion in a spread constructed from two related assets. However, traditional implementations—typically based on cointegration tests and z-score entry/exit thresholds—face well-documented limitations, including instability across regimes and declining profitability in modern markets (Tenyakov & Mamon, 2017). So in this blog post we suggest our own pair trading strategy enhancement: combine cointegration and z-score based trading signals with refined technical trading indicators to create a Relative Edge indicator.

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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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Learn to Trade Stock Pairs: Monday Morning Thoughts for Inspiration

July 1, 2019 5:43 pm |

Exhaustive and robust academic research of stock pair trading strategies on the S&P 500 show consistent trading gains.  Stock pair trading, especially using cointegration for selecting pairs, has shown historic profitability of up to 5% per month.  Learn to trade stock pairs in our 30 Minute Webinar.  Sign up for a 15-Day Free Trial and get our eBook Trade Like a Hedge Fund for free.

Learn to Trade Stock Pairs Today!

Free triallers also receive access to our Pair Trading Video Training Course.  Taught by a professional pair trader, this series presents pair trading in simple, easily accessible terms. 

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