At Ten Cap, we are always looking for ways to generate stronger returns without taking on unnecessary risk. Markets don’t move in straight lines, and opportunities exist on both sides - in the companies that surprise on the upside and those that fall shortof expectations. Pairs trading is a natural complement to an alpha extension strategy. It involves identifying two historically correlated stocks - often within the same sector -and taking opposing positions when their outlook and prices are expected to diverge. The goal is to profit from the relative movement between the two, assuming the spread will eventually revert to its historical mean.
