We are pleased to introduce our premium product - Pair Strategy - A must for such a volatile market.
Featured Pair: UNITECH/ DLF
Strategy:
Buy Unitech and sell DLF on a rupee-neutral basis in anticipation of a reversion to the target price ratio of 0.42. We recommend booking profits at a ratio of 0.40, keeping a stop loss of 0.36. Over the past 21 trading sessions, Unitech has underperformed DLF as Unitech has declined by 31% as against a fall of 19% in DLF. As a result the current price ratio is trading 2.56 standard deviations below its 60 day mean price ratio.
Risk Reward
The price ratio has been mean reverting in nature. The ratio is currently at its support level of 0.376 (see chart I above). The premium/discount of the price ratio over its 60 day mean is at -13% which is near the lower end of its trading range (see chart II). Reversion to the expected price ratio would yield a return of 11.7% on GEP.
MatrixCap
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