Hey guys!
Lets say I trade CFD, 2 stocks with different prices, would 10 stocks of stock A be a perfect hedge too stock B ? (they have different ratios)
and what about equites.
I have 10000dollar that Im gonna use on a trade. and stock a is at 500dollar per share, and stock b is at 50dollar per share(stock A was trading at 300 one year ago, and stock B was trading at 46, ratio of 6.5 and now ratio of 10. Is that the right way to approach it by, buying 20 shares of A and 200 shares of B ? or should I allways hold the same amount of stocks at each side as I hedge ? As a market crash @10% in a banking sector would move both stocks down 10 % but it would be a different amount since they are trading at different prices. but with equal amount of dollars in each trade, a unsuspected banking crash would just move both down 10%.
best regards
Lets say I trade CFD, 2 stocks with different prices, would 10 stocks of stock A be a perfect hedge too stock B ? (they have different ratios)
and what about equites.
I have 10000dollar that Im gonna use on a trade. and stock a is at 500dollar per share, and stock b is at 50dollar per share(stock A was trading at 300 one year ago, and stock B was trading at 46, ratio of 6.5 and now ratio of 10. Is that the right way to approach it by, buying 20 shares of A and 200 shares of B ? or should I allways hold the same amount of stocks at each side as I hedge ? As a market crash @10% in a banking sector would move both stocks down 10 % but it would be a different amount since they are trading at different prices. but with equal amount of dollars in each trade, a unsuspected banking crash would just move both down 10%.
best regards