Today we highlight a new feature of the PDQ Dashboard . . the % gain for each side of each pair trade contributing to the equity curve (Net % R). In the case of the VXX above it’s clear that the VXX side of each pair trade is the real money maker so when the PDQ delivers a high consensus signal with 7 out of 8 pairs Short VXX the odds of success are extremely high.
That’s not to say you shouldn’t trade the B side of the pairs, but from a risk/reward and capital utilization perspective the Short VXX trade is the odds on favorite. In the ongoing search for VXX/pair linearity there are many candidates that are highly correlated with the VXX but which fail to display the attractive skew of returns as demonstrated by this currency basket. I’ll explore several other non-correlated baskets in future posts that can, perhaps surprisingly, be successfully engaged to trade both the VXX and TLT.
Tomorrow . . something a little different – – a setup on the Schwab platform that can help detect HFT activity.
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