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Do You Even Pairs Trade?

March 30, 2021 by Frank Kaberna| Tips & Strategies

As March draws to a close, equity indices from the Small Exchange are within a few percentage points of unchanged on the month. That said, the last four weeks of stock movement have been anything but sideways for the active trader utilizing pairs opportunities.

Extreme Sector Rotation

As of last Friday, the industrial sector outperformed technology stocks by nearly 10% in the month of March; and just two weeks in, energy was trading almost 10% on top of tech before coming back to a more normal difference of 4% month-to-date.*

The Year in Sector Rotation (Energy vs Industrial vs Technology)

Source: dxFeed Index Services (https://indexit.dxfeed.com)

Gain exposure to popular markets with standardized tick values and expiration dates on the Small Exchange. See why the smalls are making a big splash. >>

Convergence vs Divergence

Active traders can potentially profit from a flat stock market’s battling inner workings via the pairs trade. Small Stocks (SM75) futures bundle industrial, energy, material, financial, and technology stocks together into a single contract, while Small Technology (STIX) futures exclusively hold tech stocks. The two products have captured much of the sector rotating action of the last month and beyond.

The Stock Pairs Trade

Convergence Divergence
-1 Outperformer / +1 Underperformer +1 Outperformer / -1 Underperformer

A sideways equity index isn’t a good enough reason for inactivity; there’s always something to do in this greatly diverse stock market.

*All statistics computed as of 3/26/21

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To learn more about how the Small Exchange is merging the efficiency of futures with the clarity of stocks, make sure to subscribe to their YouTube channel and follow them on Twitter so you never miss an update.

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.

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Filed Under: Tips & Strategies

About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

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