Pairs Trade: Buy Chubb, Sell Ace

Dynamic Hedge blogs about correlation, relative value and quantitative analysis at http://www.dynamichedge.com

The trade here is to be short $ACE (ACE Limited) and long $CB (The Chubb Corporation).  Pull this spread up on your charting package and look at the long term moves.  The spread could easily move to the $5.50 mark before reverting to the mean.  The good news is that both stocks are through their earnings dates.  If you believe in a bounce of the overall market, short less of $ACE or buy more $CB.

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