Rajeev Seth's  Instablog

Rajeev Seth
Send Message
Rajeev Seth is the Managing Director of BeatIndex, an investment management consulting firm. Specializing in quantitative investment management, he has consulted for many diversified asset managers, and startup hedge funds. The philosophy of BeatIndex is that one can indeed beat indexes, by a... More
My company:
My blog:
Rajeev Seth's Blog
  • Our Paired Trade On PFG-LNC Continued To Converge Today And Shows More Profit 0 comments
    Apr 10, 2013 4:31 PM | about stocks: PFG, LNC

    This is an update on the paired trade as of market close on Wed, Apr 10, 2013. The trade was entered based on prices on market close of April 5, 2013

    Sell short 200 shares of PFG (PRINCIPAL FINANCIAL GROUP)
    Buy 257 shares of LNC (LINCOLN NATIONAL CORP)

    The trade is now showing even more profit after 3 trade days,

    (click to enlarge)

    An individual investor with 50% margin a brokerage account would have needed a margin of about $7300 if she used the trade quantities of -200 PFG and long 257 LNC. With the $311 profit it now shows, she has a return of over 4% on the amount of margin used in only 3 days. What's more,the volatility of this return is much lower than that of alternative strategies that would rival cash. I will demonstrate the low volatility, drawdown etc of this strategy in my future articles, and show how effective it is as an alternative to a dividend strategy

    As the picture below shows, after 3 trade days, the spread on this paired trade is continuing to converge even more. My system shows that it is still fine to enter this paired trade even now. You still have time to capture more profit by entering this trade if you have not already done so.

    You may compare this figure above to the figure for each of the prior 3 days shown below to see how the spread is converging to 0.

    Stocks: PFG, LNC
Back To Rajeev Seth's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.