QUANT CORNER: US AND EUROPEAN EQUITY PAIR TRADES The list contains an automated list of potential pair trades among US and European equities. The ten pair trade candidates are ranked according to their absolute (standardised) deviation following a preliminary screening based on industry group, correlation, cointegration, zero-crossings and half-life. Monday, February 02, 2015 Price Trade size Position Release Industry 47.74 USD 128.40 NOK -209 530 Short Long 2/19/2015 2/6/2015 Oil&Gas Walt Disney Co/The Comcast Corp 90.96 USD 53.15 USD -110 180 Short Long 2/3/2015 2/24/2015 Media Phillips 66 Royal Dutch Shell PLC 70.32 USD 26.93 EUR -142 303 Short Long 4/30/2015 4/30/2015 Oil&Gas 8.1 2.2 0.91 0.06 15 5 -3 Broadcom Corp NVIDIA Corp 42.44 USD 19.21 USD -236 493 Short Long 4/24/2015 2/11/2015 Semiconductors 5.4 2.2 0.83 0.04 15 4 4 Southwest Airlines Co Ryanair Holdings PLC 45.18 USD 10.40 EUR -221 786 Short Long 4/23/2015 2/2/2015 Airlines CVS Health Corp Bed Bath & Beyond Inc 98.16 USD 74.77 USD -102 128 Short Long 2/10/2015 4/8/2015 106.60 EUR 108.10 EUR 83 -85 Long Short 2/12/2015 2/26/2015 Helmerich & Payne Inc Marathon Oil Corp 59.56 USD 26.60 USD 168 -418 Long Short 4/24/2015 2/18/2015 Oil&Gas Societe Generale SA UniCredit SpA 35.84 EUR 5.24 EUR -247 1621 Short Long 2/12/2015 3/12/2015 Jyske Bank A/S HSBC Holdings PLC 298.90 DKK 609.60 GBp 221 -1145 Long Short 2/24/2015 2/23/2015 Name Noble Energy Inc Statoil ASA Potential Spread return* (%) Correlation Cointegration Zerocrossings Halflife 0.97 0.08 35 4 Charts Noble Energy Inc vs. Statoil ASA 3 13.0 2.5 2 1 4.5 2.3 0.82 0.09 23 7 0 -1 Dec Jan Jan Jan Jan Jan Jan Dec Dec Dec Nov Nov Oct Nov Oct Oct Sep Sep Sep Aug Aug Aug -2 Walt Disney Co/The vs. Comcast Corp 3 8.0 1.9 0.85 0.07 17 6 2 1 0 Retail 4.3 1.8 0.90 0.04 19 6 -1 -2 -1.9 0.98 0.01 11 7 Banks 4.3 1.8 0.98 0.04 27 4 Banks 4.7 -1.7 0.84 0.04 19 6 Dec Dec Nov Nov Nov Oct Phillips 66 vs. Royal Dutch Shell PLC 3 10.6 Oct 8 Oct 17 Sep 0.09 Sep 0.84 Sep -1.8 Aug 3.6 Aug Beverages Aug -3 Pernod Ricard SA Anheuser-Busch InBev NV 2 1 0 -1 -2 -3 Source: Bloomberg, Saxo Bank Note: Please see page 2 for descriptions. SAXO BANK A/S | PHILIP HEYMANS ALLÉ 15 | 2900 HELLERUP | PHONE: +45 3977 4000 | WWW.SAXOBANK.COM | CVR NR: 15 73 12 49 BEHIND THE PAIR TRADES SCREENER Jan Jan Jan Dec Dec Dec Nov Nov Nov Oct Oct Oct Sep Sep Sep Aug Aug Aug -4 Jan Jan Jan Jan Jan Dec Jan Dec Dec Nov Nov Oct Nov Oct Oct Sep Sep Sep Dec Dec Dec Nov Nov Nov Oct Oct Oct Sep Sep Jan Jan Jan Dec Dec Nov Nov Nov Oct Oct Oct Dec Dec Nov Nov Nov Oct Oct Oct Sep are accepted. Sep -3 Aug -2 values indicate mean-reversion. Only pair-trade candidates with both cointegration p-values below 0.10 Half-life: The estimated number of trading days it takes the spread to revert one-half the way to the Aug -1 Cointegration: The p-values from the Augmented Dickey-Fuller and Philips-Perron tests. Briefly put, low pair-trade candidates with at least ten zero crossings are accepted. Jyske Bank A/S vs. HSBC Holdings PLC 0 horizons are accepted. Zero-crossings: The number of times the residual time series crosses zero in the sample period. Only Jan 1 Jan months. Only pair-trade candidates with have correlations above 0.75 at both the three - and six-month Jan Correlation: The correlation between the two securities' price series over the previous three and six 2 Dec 3 Dec * Price(equity B)[i] + error[i] where the intercept is forced to zero and i = 1, 2, ..., 126. Sep Aug Jan Jan Jan Dec Dec Dec Nov Nov Nov Oct Oct Oct Sep -2 Sep -3 Sep by position-weighing the returns for each position leg while the other is held constant. Aug -1 Aug 0 -2 Aug -1 Sep 1 Sep 2 0 Potential return: The approximate return (*ex costs) earned if the spread reverts to zero. It is calculated Spread: The last residual (standardised to unit variance) of the OLS regression: Price(equity A)[i] = beta Sep Aug Jan Jan Jan Dec Dec Dec Nov Nov Nov Oct Oct 1 Sep Industry: The Bloomberg Industry Classification System (BICS) level II classification of the security. Societe Generale SA vs. UniCredit SpA 3 Aug Release: The next expected company earnings release. Helmerich & Payne Inc vs. Marathon Oil Corp 2 Aug Position: The directional bet on each leg of the pair trade. Oct -3 Sep Trade size: The number of shares to be long/short in each leg of the pair trade to equal an investment of Sep -2 -3 Sep -2 Aug Price: Last available price in local currency. Aug -1 Aug 0 -1 Aug 1 Aug 2 1 USD 10,000. The trade sizes can be scaled up and down depending on individual preference. Aug Aug Jan Jan Jan Dec Dec Dec 2 0 Name: Security name. Pernod Ricard SA vs. Anheuser-Busch InBev NV 3 Aug DATA EXPLAINED CVS Health Corp vs. Bed Bath & Beyond Inc 3 Aug top-ten list of candidates is unchanged - only the spread values and charts are updated. Nov Every Monday the screener is run and the top-ten candidates are selected. Tuesday through Friday the Nov -3 Oct -2 -3 Nov -2 Oct -1 Oct 0 -1 Sep currency risk. 1 0 Sep ranks equity pairs based on the last trading day's (aboslute) standardised residual. The screener ignores 1 Sep are included in the search for potential pairs. The screener uses a look -back period of six months and 2 Aug 600) for potential pair trade candidates. Only equities, which are not currently on a short -restriction list, Southwest Airlines Co vs. Ryanair Holdings PLC 3 2 Aug Screens a selected list of well-known equities from three indices (S&P 500, Nasdaq 100, and EuroSTOXX Broadcom Corp vs. NVIDIA Corp 3 Aug BEHIND THE PAIR TRADES SCREENER Chart information On Monday the charts show the in-sample standardised residuals from the last 126 trading days (six months) for each of the ten pair-trade candidates. mean. Only pair-trade candidates with a half-life smaller than or equal to 10 (two trading weeks) are On Tuesday through Friday the charts show the most recent ten trading days with the red dot marking the residual using closin g accepted. prices from the previous Friday followed by the up-to-date performance for each of the ten pair trades. NON-INDEPENDENT INVESTMENT RESEARCH This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, prod uct or financial instrument, to make any investment, or to participate in any particular trading strategy. This material is produced for marketing and/or informational purposes only and Saxo Bank A/S and its owners, subsidiaries and affi liates whether acting directly or through branch offices (“Saxo Bank”) make no representation or warranty, and assume no liability, for the accuracy or completeness of the information provided herein. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses. In particular investments in leveraged products, such as but not limited to foreign exchange, derivates and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisor(s) in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure or risks nor a comprehensive description such risks. A ny expression of opinion may be personal to the author and may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent). This [website/communication] refers to past performance. Past performance is not a reliable indicator of future performance. Indications of past performance displayed on this [website/communication] will not necessarily be repeated in the future. No representation is being made that any investment will or is likely to achieve profits or losses similar to tho se achieved in the past, or that significant losses will be avoided. Statements contained on this [website/communication] that are not historical facts and which may be simulated past performanc e or future performance data are based on current expectations, estimates, projections, opinions and beliefs of the Saxo Bank Group. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this [website/communication] may contain 'forward-looking statements'. Actual events or results or actual performance may differ materially from those reflected or contemplated in suc h forward-looking statements. This material is confidential and should not be copied, distributed, published or reproduced in whole or in part or disclosed by recipients to any other person. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. The information in this document is not directed at or intended for “US Persons” within the meaning of the United States Securities Act of 1993, as amended and the United States Se curities Exchange Act of 1934, as amended. This disclaimer is subject to Saxo Bank's Full Disclaimer available at www.saxobank.com/disclaimer.
© Copyright 2018 ExploreDoc