The Secret Behind Pairs Trading: Bed Bath & Beyond and Etsy

Did you know investors can make money off the stock market — no matter if it’s up or down — by using a proven pairs trading strategy?

A pairs trade is a strategy where a trader will have matching long and short positions in two stocks that have a high correlation between them.

We want to make sure what we’re seeing in the markets now is following a similar pattern from market moves in the past.

These two positions will, in theory, form the base of a hedging strategy that should benefit the buyer whether there’s a positive or negative trend in the stock market.

And that’s exactly what happened for my Money Link members this week, with the help of using Bed Bath & Beyond and Etsy as the links in our pairs trading strategy. 

How To Profit From a Pairs Trading Strategy: Bed Bath & Beyond and Etsy

Bed Bath & Beyond Inc. (Nasdaq: BBBY) is an American chain of retail stores that sells domestic merchandise like kitchenware, towels, blankets and so on.

Etsy Inc. (Nasdaq: ETSY) is an American e-commerce website that sells handmade/vintage items and craft supplies. These items can fall anywhere from jewelry, bags, clothing and furniture, to toys and tools.

Basically, the wheelhouse to Bed Bath & Beyond.

Are you beginning to see how these two stocks might have some correlation between them?

I noticed that Etsy was doing incredible things on the upside on its charts, so I immediately did some research to see whose lunch was getting eaten by it.

After a little digging, guess which company I discovered had lost 9.24% growth in the past three years compared to Etsy’s 53.57% growth?

Ding! Ding! Ding! You guessed it…

 It was Bed Bath & Beyond. So as Etsy is growing, Bed Bath & Beyond was shrinking…

And so we have the beginnings of a pairs trading strategy, with one stock increasing while the other sinks. 

So then I looked at the spreads for both stocks… and oh boy

What I saw was so obvious that I’m still scratching my head as to how the most seasoned investors missed the major signs these stocks were showing. 

Check out my short video below to learn more about how to profit using a pairs trading strategy. Be sure to share your thoughts in the comments section below. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

P.S. People are looking for an easier way to trade the markets.

They want to be able to buy just before the market closes and sell the next morning…

It’s a good thing that’s possible now. 

I recently revealed why this strategy produced 12 winning trades in March alone… and has already produced a huge winner in April.

All people need to do is follow a Burn Notice I send just before the market closes… and sell the next morning to grab these overnight profits.

Discover the Strategy Here

pairs trading strategy

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