Trade of the Month: FirstRand vs Absa
As Absa rallies and FirstRand loses its flavour, it’s time to trade the relationship between them
While the longer-term fate of the global market landscape is in flux, with markets pretty much in no-man’s-land, it is difficult to take a view in terms of which stocks can be traded in the shorter term with relative safety.Thus, the strategy this month is not to take a directional "bet" on what the market might do, but to focus on the relative performance of two shares in the same sector.The trade idea is therefore a pair trade.Instead of focusing on the price of just one stock and trading for an anticipated movement in one direction (long or short), you are trading the relationship between two stocks and the change in that relationship, in terms of how they perform when compared.FirstRand has for some time been the pack leader among the banks as it was favoured by analysts and fund managers. Recently, though, the torch has been passed to Absa and FirstRand has fallen out of favour. This is shown by the charts of each stock.Note that this trade idea is based on share price data up ...
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