Volkswagen VLKAY is a buy relative to GM

Ratio Chart:

You can see how closely these two stocks trade (the blue line is GM) since Volkswagen (the bar chart) is a top selling auto company in Europe and GM is a top selling auto company in the US.

The ratio of the stock prices oscillates in a tight 15%-20% range over that past few years. Since the stocks have gone NOWHERE over the last year, you can see all of the profits (FROM HINDSIGHT) from establishing a trade where you are long one stock and short the other in the 1.23 area and exit at the 1.44 ratio area. There have been 6 movements of 15%+ on average, which, if compounded, would be a huge 100+ gain in your capital.

Ratio trading or pairs trading isn't without risk, but rather it is a very different way to make money that is stock market independent. In other words, you don't have to get the direction of the market correct, you just need to assess the strength of one stock relative to another one.

Right now, the ratio says to BUY VOLKSWAGEN and SELL SHORT GM.

1.23 last ratio

Tim 11:31AM EST Sep 3, 2015