A few years ago, a German billionaire started pair trading with two classes of Volkswagen stock.. Ended up, that he threw himself under the train. The strategy of pair trading – buying one stock against selling another within one sector – looks attractive in theory., but can be a real killer of your portfolio. This is how it works: when you trade a stock in a pair, you buy the laggard and sell the overtaker. You bet on reverting to mean. In other words, you think, what share, which performs relatively poorly, over the next period will straighten and overtake that, what worked well. In the oil sector, this could be, for example, Exxon Mobil (XOM) against Royal Dutch (RDS), in the healthcare sector something like GlaxoSmithKline (GSK) against Pfizer (PFE). This is a popular strategy, and opportunities can be easily spotted on the chart, where the ratio of one stock to another is displayed, ie. on a relative chart. Here you see a graph of the consumer goods company Unilever. (AND) against his competitor Procter & Gamble (PG). This is a three-year chart, and when the line goes up, this means, that UN is ahead of PG, а когда вниз – PG обгоняет UN.