Why This Hedge Fund Manager Pairs Trades Apple and Microsoft

Hedge fund manager Josh Van Dress prefers to pairs trade Apple Inc. AAPL against a short in Microsoft Corporation MSFT. The CIO at Able Capital Management was recently on Benzinga’s #Premarket Prep to discuss his market-neutral pairs trading strategy.

Generally, Van Dress uses a combination of fundamental and technical algorithms to choose an investment strategy. Then, he will layer into a position – first adding the core investment position that will become a 60-90 day hold. Secondly, Able Capital Management puts on three or four differentiating pairs to ensure market neutrality. That second layer is full of short-term positions that he bases on 20-day patterns.

In relation to Apple, Van Dress looks to pair it primarily with Microsoft. The manager pointed to Microsoft’s relatively stability and the absence of news catalysts that could propel the stock significantly higher. In addition, the company has a large float – meaning that the stock is easy to find and short.

Van Dress also mentioned that he may also use the iShares Russell 2000 Index IWM to offset a long Apple position.

Check out the full interview here:

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