e.g. Pairs Trade – Tires

Buy Michelin (ML FP), Sell Continental (CON GY)

Vox Pop polls in sectors and sub sectors defined by the consumer. The methodology is 63%-67% accurate predicting 3 month performance 2 months after polling (sub sector leaders and losers, Fall 08).

Michelin (ML FP) led the Tire subsector with a Growth Factor of 1.17 in Apr 08. Continental (CON GY) on the other hand was the sector loser with a low score and a low overall ranking. This ‘spread’ presented an excellent opportunity for a pairs trade.

Polling in Sep 08 saw Michelin consolidate its Growth Factor and crucially the spread with sector loser Continental.

The trade had a +40% spread over a 9 month period.