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Pair Trade of the Day: Long Bank of America, Short Goldman Sachs

|Includes: Bank of America Corporation (BAC), GS

Pair Trade: Long BAC, Short GS

Quick look at a trade here. Bank of America has really underperformed as of late, but Goldman has had a pretty big run up, especially with the SEC settlement taking place. 

I think it's time that this pair starts to revert back to historical levels. The only thing I worry about here is a rumor about Goldman going private, but for now that is all it is - a rumor.

Let's look at the graph:



Correlation: 57.98%
Cointegration: 61.00%
Std. Dev: 2.32
Target Move: 20.21%

To keep it dollar neutral: 0.09 shares of BAC = 1 share of GS

The link to the full analysis of the pair: http://www.catalystcorner.com/index.php?m=pair_tool&p=graph&t1=bac&t2=gs&datefrom=02/12/2010&dateto=08/12/2010&capital_employed=10000

If you believe in the principle of mean convergence, it is reasonable to expect that this pair will return to a level more in-line with the mean.

Good luck! If you'd like to see the full version of this pair, visit our Pair Tool (completely free) and get a really nice statistical, fundamental, and graphical output.

Happy trading,
Phil
phil@catalystcorner.com

The graphical representation of the this pair was generated from the Pair Trading Tool at Catalyst Corner. Both the Pair Tool and site membership are completely FREE.

Catalyst Corner is a financial website that provides FREE in-depth researchs on comapnies with significant milestones or "catalysts" coming up in the near-term. 

Disclaimer: The information disseminated by Catalyst Corner ("Catalyst", "us", or "we") is for informational purposes only, and is neither a solicitation to buy nor an offer to sell securities. We do not undertake or purport to render any investment advice or recommendations for the buying and selling of securities.
 





Disclosure: No positions