#TradingPairs101

#TradingPairs101 Trading pairs are a popular strategy that involves matching a long position with a short position on securities with a high correlation. Here's a breakdown of what you need to know:

*What are Trading Pairs?*

Trading pairs are two assets with a high positive correlation that are used to create a market-neutral position. This strategy is based on the concept of mean reversion, which assumes that assets trading above or below their average will revert to the mean over time ¹.

*How Does Pairs Trading Work?*

To perform a pairs trade, you'll go short on the asset that's trading above its historical range and long on the asset that's trading below it. The goal is to profit from the relative returns as the assets revert to their historical pattern.