Ladies and gentlemen, I recommend you an idea of the pair trade:
1. it is long position in the company CXO (Concho Resources) and short position in the company ESV (Ensco plc).
2. it is long position in the company CXO (Concho Resources) and short position in the company CVE (Cenovus Energy Inc.).
Stocks of the company CXO are stronger than ESV and CVE since 2013. I think that next 2 months stocks of the company CXO will be stronger than ESV ana CVE.
Risk-management:
I reccomend to use a conservative approach: half of allocated capital use in trade and half in cash.
Then the trade capital divide equally between 2 pairs: CXO-ESV and CXO-CVE.
The proportions of each company in pairs:
1. Volatility of CXO and ESV is equal, so:
* 51% it is long CXO.
* 49% it is short ESV.
2. Stocks of the company CXO are more volatility than CVE:
* 44% it is long CXO.
* 56% it is short ESV.
This allocation between stocks is necessary for the parity volatility.
Sorry for my bad english.
1. it is long position in the company CXO (Concho Resources) and short position in the company ESV (Ensco plc).
2. it is long position in the company CXO (Concho Resources) and short position in the company CVE (Cenovus Energy Inc.).
Stocks of the company CXO are stronger than ESV and CVE since 2013. I think that next 2 months stocks of the company CXO will be stronger than ESV ana CVE.
Risk-management:
I reccomend to use a conservative approach: half of allocated capital use in trade and half in cash.
Then the trade capital divide equally between 2 pairs: CXO-ESV and CXO-CVE.
The proportions of each company in pairs:
1. Volatility of CXO and ESV is equal, so:
* 51% it is long CXO.
* 49% it is short ESV.
2. Stocks of the company CXO are more volatility than CVE:
* 44% it is long CXO.
* 56% it is short ESV.
This allocation between stocks is necessary for the parity volatility.
Sorry for my bad english.