Same-sector pairs

Why this can work

The two largest companies in a sector usually move together. When one runs far ahead of the other, the gap has tended to close.

What can go wrong

Two leaders in a sector can drift apart for good (one wins a big contract or loses a customer); correlation in the past doesn't hold it together.

Rule

Two largest companies per sector with daily-return correlation 0.6+; ratio 2+ standard deviations off → long the laggard, short the leader; exit near the average or after 60 days.

Backtest

At ₩1억 a trade, Nov 1, 2021 to Oct 30, 2026.

Capacity: No edge after costs
Avg costs: 1.7%
Avg fill days: 1.0
Turnover a year: 58%

57 signals → 36 trades (0 left out by filters, 0 over the position limit, 0 still open, 0 too big to fill, 0 exited at delisting).

Short-selling bans: 21 trades skipped, 0 used index futures instead.

Equity curve (% of book)

Shaded: out-of-sample, from Apr 30, 2025.

Trade returns

How this is calculated

Each trade pays commission (your setting), half the typical spread (half a price tick) on the way in and out, the securities transaction tax when a stock is sold or sold short, and borrow fees for a short stock (by how easy it is to borrow). Index futures pay a small fee and no tax or borrow.
Price impact uses the square-root model: impact = k × daily volatility × √(order ÷ 20-day average trading value), k = 1.0 by default, on the way in and out, for each leg.
Days to fill = trade size ÷ (average trading value × your participation %). Orders that take more than a day are spread over those days at each day's typical price (high + low + close ÷ 3), in and out.
Capacity is the trade size at which the setup's average return after costs falls to zero, if each trade were done within a day.
Everything is point in time: filters use only what was known on the entry day, financial statements count from their reporting deadline, and delisted stocks stay in (a stock that stops trading is exited at its last price).
Short selling was banned in Korea (all stocks Nov 2023–Mar 2025, most stocks from Mar 2020). During bans a short stock leg moves to index futures when futures are your hedge; otherwise the trade is skipped. Each setup says how many.
In-sample is the first 70% of the history, out-of-sample the last 30%. Walk-forward trades each half-year only if the setup made money over the previous two years.
Returns are per trade, as a % of the trade size. Sharpe is per trade, scaled by how often the setup trades. Drawdown and the equity curve are in % of your book.

By year

Year	Trades	Profitable	Avg net
2022	2	100.0%	+11.0%
2023	10	50.0%	−5.4%
2025	12	33.3%	−18.9%
2026	12	41.7%	−4.3%

Walk-forward

Each half-year is traded only if the previous two years were positive.

From	Traded	Trades	Avg net
Nov 1, 2023	Yes	1	+2.0%
May 1, 2024	No	0	—
Oct 30, 2024	No	1	−68.0%
Apr 30, 2025	No	6	−9.3%
Oct 29, 2025	No	12	−12.6%
Apr 29, 2026	No	5	−0.7%
Oct 28, 2026	No	0	—

	All	In-sample	Out-of-sample	Walk-forward
Trades	36	13	23	1
Profitable	44.4%	53.8%	39.1%	100.0%
Avg net	−8.6%	−7.7%	−9.1%	+2.0%
Median	−7.8%	+1.7%	−10.3%	+2.0%
Worst trade	−68.0%	−68.0%	−61.8%	+2.0%
Worst drop (% of book)	−6.8%	−2.6%	−4.2%	0.0%
Sharpe	-0.95	-0.69	-1.22	—

Stock	Against	Entry	Exit	Gross	Costs	Net	Fill days
LHyosung Heavy Industries	LS Electric	Jul 24, 2026	Oct 23, 2026	−6.0%	1.6%	−7.6%	1
LLG CNS	Samsung SDS	Jul 20, 2026	Oct 19, 2026	+2.4%	1.4%	+1.0%	1
LKakao	NAVER	May 29, 2026	Aug 26, 2026	−9.0%	1.3%	−10.3%	1
LHanwha Ocean	HD Hyundai Heavy Industries	May 13, 2026	Aug 10, 2026	+2.5%	1.2%	+1.4%	1
LKIA	Hyundai Motor	May 4, 2026	Jul 9, 2026	+13.2%	1.1%	+12.1%	1
LHD Hyundai Heavy Industries		Apr 1, 2026	Apr 22, 2026	+31.4%	1.2%	+30.2%	1
L		Mar 20, 2026	Jun 18, 2026	−46.4%	1.4%	−47.8%	1
L		Mar 9, 2026	Jun 5, 2026	−8.7%	2.7%	−11.4%	1
L		Mar 5, 2026	Jun 2, 2026	−34.5%	1.3%	−35.9%	1
L		Jan 30, 2026	Apr 30, 2026	−6.7%	1.2%	−7.9%	1
L		Jan 30, 2026	Apr 30, 2026	−29.5%	1.6%	−31.0%	1
L		Jan 16, 2026	Feb 11, 2026	+57.1%	1.5%	+55.6%	1
L		Dec 3, 2025	Mar 6, 2026	−20.6%	1.8%	−22.4%	2
L		Dec 2, 2025	Jan 16, 2026	+16.9%	1.3%	+15.6%	1
L		Dec 1, 2025	Mar 4, 2026	−35.3%	1.3%	−36.6%	1
L		Nov 3, 2025	Jan 29, 2026	−47.3%	1.2%	−48.5%	1
L		Oct 29, 2025	Jan 26, 2026	−8.9%	1.7%	−10.6%	1
L		Oct 2, 2025	Jan 6, 2026	+37.6%	1.4%	+36.3%	1
L		Aug 8, 2025	Sep 29, 2025	+22.9%	1.2%	+21.6%	1
L		Jul 15, 2025	Oct 15, 2025	+5.7%	1.9%	+3.8%	1
L		Jul 8, 2025	Oct 1, 2025	−38.2%	1.7%	−39.8%	1
L		Jul 7, 2025	Sep 30, 2025	−14.5%	1.6%	−16.1%	1
L		May 2, 2025	Jul 31, 2025	−59.6%	2.2%	−61.8%	1
L		Apr 4, 2025	Jul 4, 2025	−65.9%	2.1%	−68.0%	1
L		Nov 2, 2023	Jan 30, 2024	+4.4%	2.3%	+2.0%	1
L		Aug 16, 2023	Nov 2, 2023	+7.0%	2.0%	+5.0%	1
L		Aug 11, 2023	Sep 25, 2023	+8.3%	1.8%	+6.5%	1
L		Aug 10, 2023	Nov 10, 2023	−7.1%	1.3%	−8.4%	1
L		Aug 4, 2023	Nov 6, 2023	−6.8%	1.4%	−8.2%	1
L		Aug 1, 2023	Nov 1, 2023	−46.0%	3.1%	−49.1%	1
L		Jul 6, 2023	Oct 5, 2023	+0.5%	1.8%	−1.3%	1
L		Jun 21, 2023	Sep 14, 2023	+10.3%	1.6%	+8.7%	1
L		May 9, 2023	Aug 3, 2023	−13.7%	1.3%	−15.0%	1
L		Feb 14, 2023	May 12, 2023	+7.4%	1.7%	+5.7%	1
L		Nov 24, 2022	Feb 21, 2023	+4.5%	2.8%	+1.7%	1
L		Nov 7, 2022	Dec 27, 2022	+22.5%	2.3%	+20.3%	1

Show all 36 trades