Pairs Trade Signals
AI finds cointegrated stock pairs that have diverged — a market-neutral strategy that profits regardless of whether the market goes up or down.
How It Works
Pairs trading signals identify two historically correlated stocks whose price ratio has diverged beyond statistical norms. By going long the underperformer and short the outperformer, you create a market-neutral position that profits when the pair reverts to its historical relationship. Our AI uses cointegration testing (Engle-Granger), half-life optimization, rolling correlation stability analysis, and ML-enhanced pair scoring to find the highest-probability setups.
Cointegration testing (Engle-Granger) across 1,000+ potential pairs
Half-life calculation — estimates how long the spread takes to revert (sweet spot: 5-30 days)
ML-enhanced scoring: 6-factor composite including cointegration strength, correlation stability, sector diversification
Cluster analysis: finds intra-sector pairs with the tightest statistical relationships
Real-time spread monitoring with Z-score entry/exit triggers
Sample Signal
HD/LOW spread Z-score hit +2.3 — widest divergence in 8 months. Cointegration p-value 0.002. Half-life 12 days. Long LOW, short HD. Target: Z-score reversion to 0.
Frequently Asked Questions
What is pairs trading?
Pairs trading is a market-neutral strategy. You buy one stock (long) and sell another (short) — two stocks that historically move together. When they temporarily diverge, you bet they'll converge again. Your profit comes from the spread between them, not from market direction.
Do I need a margin account for pairs trading?
Yes, because pairs trading involves short selling. You'll need a margin account with short selling privileges. Most brokers require a minimum $2,000-$25,000 balance for margin accounts.
What happens if the pair doesn't converge?
This is the primary risk. Pairs can diverge permanently due to fundamental changes (merger, bankruptcy, sector shift). Our AI mitigates this with stop-losses on the spread, fundamental monitoring, and cointegration stability checks. If cointegration breaks down, the signal is closed.
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Tradewink provides market data and analytics tools. Signals are informational only and do not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Tradewink is not a registered investment adviser or broker-dealer. All trading decisions are made solely by you. Trading involves risk of loss. Past performance does not guarantee future results.