Design and Implementation of Pair Trading Strategy Software to Use on the Capital Market

The purpose of this research is to design software and evaluate the implementation of the pair trading strategy in the stock market of Iran. In order to review this strategy، two companies - National Development Group (Bank) and Insurance Industry (Insurance) in 2013 - were selected and their stock prices were extracted from Rahavard Novin Software. Before using those two stocks، their capability of getting paired were evaluated via usage of correlation، reliability and long-term tests to make sure that they can be paired all respects regarded. After the design of pair trading strategy software، its implementation capability for two companies، named above، were investigated. The results showed that this strategy is applicable and its signals can be used for trading. Also finding of this research proved that this strategy is more applicable for stock pairs which have similar price movements، more periodic volatilities (weekly، monthly) and the feature of mean reversion. The more the price of trading pairs and periodic volatilities are correlated، the more the implementation capability of the strategy and its profitability will be. For designing this software، we used C# programming language. This software is designed for the first time in Iran and it is easy to use and client-friendly.