#TradingPairs101

Pairs trading is a popular strategy that involves matching a long position with a short position on securities that have a strong correlation. Here's an explanation of what you need to know:

*What are pairs trading?*

Pairs trading involves two assets that have a strong positive correlation, and 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 return to their average over time¹.

*How does pairs trading work?*

To conduct pairs trading, you would take a short position on the asset that is trading above its historical range, and a long position on the asset that is trading below it. The goal is to benefit from the relative returns as the assets revert to their historical patterns.