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The stocks of many different companies have a tendency to react in the same way in the markets.
It’s possible that this is due to the fact that they work in the same field, however this isn’t always the case.
Pairs trades are trading techniques that take use of this trait to generate profits.
A trader will engage in this strategy by taking up a long position on one of the pairs while simultaneously opening a short position on the other.
The objective of this approach is to profit from situations in which the two stocks do not react in the same way.
