The pairs trading concept is straight forward - find 2 stocks which have prices that moved historically together and bet on convergence when the spread between. Pairs trading is a market-neutral trading strategy that matches a long position with a short position in a pair of highly correlated instruments such as two stocks. "Quants" is Wall Street's name for market researchers who use quantitative analysis to develop The first step in designing a pairs trade is finding two stocks that are highly correlated. Usually that means that the businesses are in the same.
Stock pair trading - Casino