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Transcript of PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of...
![Page 1: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/1.jpg)
PAIRS TRADING PANELPAIRS TRADING PANEL
Steve Slavin - Co-Founder of Steve Slavin - Co-Founder of PairTrader.comPairTrader.com
Ron Schelling - Founder of 2Hedge.comRon Schelling - Founder of 2Hedge.com Douglas Ehrman – CEO and Co-Douglas Ehrman – CEO and Co-
Founder of PairsTrading.comFounder of PairsTrading.com
John Greeley - ModeratorJohn Greeley - Moderator
![Page 2: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/2.jpg)
Global Hedge Fund Global Hedge Fund Industry Assets Exceed $1 Industry Assets Exceed $1
TrillionTrillion The $25 billion Pennsylvania State The $25 billion Pennsylvania State
Employees' Retirement System Employees' Retirement System pension doubled its allocation to pension doubled its allocation to hedge funds to 20% last year. hedge funds to 20% last year.
Massachusetts' state pension fund Massachusetts' state pension fund has allocated $1.6bn to hedge funds has allocated $1.6bn to hedge funds in one of the largest single block in one of the largest single block allocations in the US.allocations in the US.
![Page 3: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/3.jpg)
Funds of FundsFunds of Funds
Arden Asset Arden Asset ManagementManagement
Ivy Asset Ivy Asset ManagementManagement
K2 AdvisorsK2 Advisors Silver CreekSilver Creek Pacific Pacific
Alternative Asset Alternative Asset Management Management CompanyCompany
Blackstone Blackstone Alternative Asset Alternative Asset ManagementManagement
Pacific Alternative Pacific Alternative Asset ManagementAsset Management
Morgan Stanley Morgan Stanley Alternative Alternative Investment Investment PartnersPartners
Mesirow Financial Mesirow Financial Advanced StrategiesAdvanced Strategies
![Page 4: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/4.jpg)
ALTERNATIVE ALTERNATIVE INVESTMENTSINVESTMENTS
STYLESSTYLES CONVERTIBLE ARBITRAGECONVERTIBLE ARBITRAGE DEDICATED SHORT BIASDEDICATED SHORT BIAS EMERGING MARKETSEMERGING MARKETS EQUITY MARKET NEUTRALEQUITY MARKET NEUTRAL EVENT DRIVENEVENT DRIVEN FIXED INCOME ARBITRAGEFIXED INCOME ARBITRAGE GLOBAL MACROGLOBAL MACRO LONG/SHORT EQUITYLONG/SHORT EQUITY MANAGED FUTURESMANAGED FUTURES MULTI-STRATEGYMULTI-STRATEGY
![Page 5: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/5.jpg)
Equity Market Neutral: Equity Market Neutral: Statistical ArbitrageStatistical Arbitrage
utilizes quantitative analysis of technical factors to utilizes quantitative analysis of technical factors to exploit exploit
pricing inefficiencies between related equity pricing inefficiencies between related equity securities,securities,
neutralizing exposure to market risk by combining neutralizing exposure to market risk by combining long and short positions.long and short positions.
The strategy is based on quantitative modelsThe strategy is based on quantitative models for selecting specific stocks with equal dollar for selecting specific stocks with equal dollar
amountsamounts comprising the long and short sides of the portfolio.comprising the long and short sides of the portfolio. Portfolios are typically structured to be market,Portfolios are typically structured to be market, industry, sector, and dollar neutral industry, sector, and dollar neutral
![Page 6: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/6.jpg)
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
EastWestNorth
EQUITY - MARKET NEUTRAL INDEXSTANDARD & POORS 500
-50%
0%
50%
100%
150%
200%
250%
300%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
![Page 7: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/7.jpg)
EQUITY S & P EQUITY S & P 500 MARKET 500 MARKET TOTAL TOTAL NEUTRAL NEUTRAL RETURN RETURN AVERAGE MONTHAVERAGE MONTH
BEST MONTHBEST MONTH WORST MONTHWORST MONTH MONTH STD DEVMONTH STD DEV ANNUAL STD DEV ANNUAL STD DEV BETA (vs S&P 500)BETA (vs S&P 500) SHARPESHARPE
0.84%0.84% 0.97%0.97%
3.26%3.26% 9.78%9.78%
-1.15%-1.15% -14.46%-14.46%
0.88%0.88% 4.52%4.52%
3.05%3.05% 15.67%15.67%
0.070.07 .0.97.0.97
2.132.13 0.440.44
![Page 8: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/8.jpg)
Manager of managers Frank Russell has appointed Jacobs Levy, who is widely recognized as one of the top firms in the quant
industry, both in terms of theory and practice.”
![Page 9: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/9.jpg)
D. E. Shaw group has made a conscious D. E. Shaw group has made a conscious effort to build a small team of effort to build a small team of extraordinarily gifted professionals, each extraordinarily gifted professionals, each among the very best in his or her among the very best in his or her profession.profession.
recruitment of world-class mathematicians, recruitment of world-class mathematicians, computer scientists, researchers, traders, computer scientists, researchers, traders, and high-tech entrepreneurs and high-tech entrepreneurs
has been described as “the most intriguing has been described as “the most intriguing and mysterious force on Wall Street.” and mysterious force on Wall Street.”
![Page 10: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/10.jpg)
PAIRS RELATIVE (CBRL-PAIRS RELATIVE (CBRL-IHP)IHP)
-30%
-10%
10%
30%
50%
70%
90%
110%
26-N
ov
19-D
ec
14-J
an
6-F
eb
3-M
ar
25-M
ar
16-A
pr
9-M
ay
3-Ju
n
25-J
un
18-J
ul
11-A
ug
3-S
ep
25-S
ep
17-O
ct
10-N
ov
3-D
ec
26-D
ec
21-J
an
12-F
eb
8-M
ar
30-M
ar
22-A
pr
14-M
ay
7-Ju
n
29-J
un
PA
IRS
RE
LA
TIV
E
0
5
10
15
20
25
30
35
40
45
CL
OS
ING
PR
ICE
PAIRS RELATIVE CBRL IHP
![Page 11: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/11.jpg)
50 DAY ROC (CBRL-IHP)50 DAY ROC (CBRL-IHP)50 DAY ROC
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
11-F
eb
25-F
eb
11-M
ar
25-M
ar
8-A
pr
22-A
pr
6-M
ay
20-M
ay
3-Ju
n
17-J
un
1-Ju
l
15-J
ul
29-J
ul
12-A
ug
26-A
ug
9-Se
p
23-S
ep
7-O
ct
21-O
ct
4-N
ov
18-N
ov
2-D
ec
16-D
ec
30-D
ec
13-J
an
27-J
an
10-F
eb
24-F
eb
9-M
ar
23-M
ar
6-A
pr
20-A
pr
4-M
ay
18-M
ay
1-Ju
n
15-J
un
29-J
un
CBRL IHP
![Page 12: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/12.jpg)
50 DAY ROC DIFF 50 DAY ROC DIFF (CBRL-IHP)(CBRL-IHP)
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2/11
/200
3
3/11
/200
3
4/11
/200
3
5/11
/200
3
6/11
/200
3
7/11
/200
3
8/11
/200
3
9/11
/200
3
10/1
1/20
03
11/1
1/20
03
12/1
1/20
03
1/11
/200
4
2/11
/200
4
3/11
/200
4
4/11
/200
4
5/11
/200
4
6/11
/200
4
CBRL-IHP
![Page 13: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/13.jpg)
PAIRS RELATIVE PAIRS RELATIVE (GP/MWV)(GP/MWV)
-20%
0%
20%
40%
60%
80%
100%
PR
ICE
RE
LA
TIV
E
0
5
10
15
20
25
30
35
40
CL
OS
ING
PR
ICE
PAIRS RELATIVE GP MWV
![Page 14: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/14.jpg)
50 DAY ROC (GP-MVW)50 DAY ROC (GP-MVW)50 DAY ROC
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
11-F
eb
25-F
eb
11-M
ar
25-M
ar
8-A
pr
22-A
pr
6-M
ay
20-M
ay
3-Ju
n
17-J
un
1-Ju
l
15-J
ul
29-J
ul
12-A
ug
26-A
ug
9-Se
p
23-S
ep
7-O
ct
21-O
ct
4-N
ov
18-N
ov
2-D
ec
16-D
ec
30-D
ec
13-J
an
27-J
an
10-F
eb
24-F
eb
9-M
ar
23-M
ar
6-A
pr
20-A
pr
4-M
ay
18-M
ay
1-Ju
n
15-J
un
29-J
un
GP MWV
![Page 15: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/15.jpg)
50 DAY ROC DIFF (GP-50 DAY ROC DIFF (GP-MVW)MVW)
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
2/11
/200
3
3/11
/200
3
4/11
/200
3
5/11
/200
3
6/11
/200
3
7/11
/200
3
8/11
/200
3
9/11
/200
3
10/1
1/20
03
11/1
1/20
03
12/1
1/20
03
1/11
/200
4
2/11
/200
4
3/11
/200
4
4/11
/200
4
5/11
/200
4
6/11
/200
4
GP-MWV
![Page 16: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/16.jpg)
PAIRS RELATIVE (K-GIS)PAIRS RELATIVE (K-GIS)
-20%
0%
20%
40%
60%
80%
100%
PR
ICE
RE
LA
TIV
E
5
10
15
20
25
30
35
40
45
50
55
CL
OS
ING
PR
ICE
PAIRS RELATIVE K GIS
![Page 17: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/17.jpg)
50 ROC (K-GIS)50 ROC (K-GIS)50 DAY ROC
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
11-F
eb
11-M
ar
11-A
pr
11-M
ay
11-J
un
11-J
ul
11-A
ug
11-S
ep
11-O
ct
11-N
ov
11-D
ec
11-J
an
11-F
eb
11-M
ar
11-A
pr
11-M
ay
11-J
un
K GIS
![Page 18: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/18.jpg)
50 DAY ROC DIFF (K-50 DAY ROC DIFF (K-GIS)GIS)
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2/11
/200
3
3/11
/200
3
4/11
/200
3
5/11
/200
3
6/11
/200
3
7/11
/200
3
8/11
/200
3
9/11
/200
3
10/1
1/20
03
11/1
1/20
03
12/1
1/20
03
1/11
/200
4
2/11
/200
4
3/11
/200
4
4/11
/200
4
5/11
/200
4
6/11
/200
4
K GIS
![Page 19: PAIRS TRADING PANEL Steve Slavin - Co-Founder of PairTrader.com Steve Slavin - Co-Founder of PairTrader.com Ron Schelling - Founder of 2Hedge.com Ron Schelling.](https://reader035.fdocuments.in/reader035/viewer/2022081418/56649ed45503460f94be4d2b/html5/thumbnails/19.jpg)