The clouded mind sees nothing

Mitchell Baker on his experience at Firefox(record for the highest no of downloads in 24 hrs - 8 Million): “Every once in a while — for those people who are really lucky — we get to experience a moment where everything comes together. A period where dreams and hard work merge together with remarkable results. This is such a time for Mozilla. It’s based on hard work and execution of course.

The stock (PETROLEO BRASILEIRO) and its relevant ETF(MSCI BRAZIL) is a great example of mean reverting stock with respect to its ETF. Here is the yahoo chart : Mean Reversion If one looks carefully, one can definitely find a lot of stocks where the residuals mean reverts…But the challenge is to do it on a large number of stocks quickly…Why should one do that ? Even you get beaten on one mean reversion trend , you are always safe, thanks to Law of large numbers.

Understanding a theory means Understanding it as an attempt to solve a certain problem -- Sir Karl Pooper

Simple ideas are usually very powerful. “Pairs trading” is based on one such simple but powerful idea which generated millions in profits for various firms. Morgan Stanley which first implemented this strategy and a host of other firms which copied this technique and made a lot of money. Pairs trading is based on 2 constructs : First, Any stock moves in a random way , however there is a systematic component to it and idiosyncratic component.