qqq/qqqe and rsp/spy pairs

[jim leahy]

i'm just identifying these as potential pairs. i don't know if this is a good time to trade them.
qqqe is the equal weight qqq and rsp is the equal weight spy. back in late february, qqq was
under-performing qqqe; it usually outperforms. at that time there was a lot of political flack for
the FANG stocks and they went down quite a bit. that was a good time to sell qqqe and buy qqq.
currently qqq is outperforming and it's been that way for several months.

likewise, spy usually outperforms rsp and is currently at an extreme out-performance over the
last few weeks, relative to the past 5 months. i don't know if it will get worse as the us/china trade
uncertainty continues. i'm watching these pairs and will do some more analysis to see if there's a
repeatable pattern.

if you plot the price difference between qqq and qqqe, adjusted for a notional
equivalent ratio, it's been oscillating in a range of about $4. it's at an extreme now but i'm
still not ready to commit.

 

[status1]

I have not heard about the QQQE so I looked it up
Seems like it has a lot lower volume and a lot wider bid ask spread than the QQQ
You are not too concerned about that ?

 

[jim leahy]

Seems like it has a lot lower volume and a lot wider bid ask spread than the QQQ
You are not too concerned about that ?

that's definitely something to be aware of but the spreads aren't too bad; 4-5 cents. if
you're doing a large size it might take a while to get filled, but trades in the hundreds shouldn't
be a problem. i wouldn't do options in it and i wouldn't day trade it.

 

[jim leahy]

for further reassurance the low volume isn't much of a problem, here's a time and sales snippet from
today. you can see, trades in the low thousands didn't move the price much.

 

[Marc1]

Hi Jim,

Thanks for kicking off this thread.

I may have set up the correlation graph wrong, but I see that the biggest differences between QQQ and QQQE over the last ~9 months, occurred back in Feb, and that being -6.57. Can you post the correlation graph you have on this pair, please?

Marc

 

[jim leahy]

yes, that's when qqq relative performance fell below qqqe. i started a paper
trade on the 22nd. btw, i don't claim credit for finding this. i was alerted
about it by a news article. below are graphics for the relative performance
charts and the equity curve of my paper trade. the equity curve extends to the
current date but i certainly wouldn't have been in this trade that long.