Pair Trading Apple (AAPL) and Research In Motion (RIMM)

Apple (AAPL) and Research In Motion (RIMM) have been fighting for market share for a number of years. Both are trying to dominate the other in the smartphone market.

Research In Motion (RIMM) had the lead with the BlackBerry, but Apple (AAPL) has since come back with their very popular iPhone.

What is interesting to note is that in this last 8 week rally on the Nasdaq, Research In Motion (RIMM) did not perform as well as Apple (AAPL) did. This means that Apple (AAPL) has better relative strength than Research In Motion (RIMM).

I am looking for the general market to show weakness through the next week and I expect to see Research In Motion (RIMM) fall faster than Apple (AAPL). I’m going to buy Apple (AAPL) and short Research In Motion (RIMM). I will take an equal amount of money for each market and buy a corresponding number of shares to balance the positions and decrease risk.

This is what I call “pair trading.” You’re looking for the percentage change in the market between Research In Motion (RIMM) and Apple (AAPL) to move in Apple’s (AAPL) favor no matter which direction Apple (AAPL) or Research In Motion (RIMM) head.

In my new short video below, you will learn why I came up with this strategy and why it may offer a low-risk trade in the current market environment.