iCharts Discussions

[rk_a2003]

"Over the past three weeks, strong rally in other nifty members has led to a breakdown in the co-relation between RELIANCE and NIFTY,thus widening the two months historical price ratio relationship above Upper Band 2 at 6.81* (mean+2nd standard deviation).

Two months co-relation between RELIANCE and NIFTY is above 90%. We recommend traders to go long on RELIANCE (4 Lot Oct futures) and short NIFTY (3 lot Oct futures) at price ratio at or below 6.81- 6.88 with Stop loss placed at 6.93 for target of 6.69.

Current price ratio*(6091/898=6.81), Recommend price ratio to enter pair at 6.81-6.88."


This is a call given by one of the leading brokerage. Members please discuss about it. I often fail to understand the pair strategies. Are they relatively safe? Is minimum success guaranteed? Minimum loss assured?

[vinay28]

rk, this is very common. though reason given is relative performance of nifty and ril, in general, such hedging has always been employed by traders for decades.

I have done it a few times in recent months and have posted it also, particularly with nifty, infy and ril.