Considerations

Beyond picking the assets, a pair trade has a handful of factors that quietly decide whether the position behaves the way you expect. The basics: which side to long, which to short, leverage, entry and exit levels, and liquidation risk. The advanced ones:

Net funding

Traders often pay funding on one leg and receive it on the other. Chart any pair and Orchard shows you the net funding on the position directly (useful because funding can eat a slow mean-reversion trade).

Slippage

One leg is usually deeper than the other. Execution is market-style with the engine managing tolerance, but size outside the most liquid names and the thinner leg moves price. If your size is meaningful relative to the leg's book, expect slippage on entry and exit.

Correlation between the two assets

Pair trading has a rich academic history, and it starts with correlation: you want two assets that move together most of the time, so a divergence from that relationship is a tradable event rather than noise. Pear provides correlation, cointegration, z-score, and hedge-ratio analysis on the Agent Stats panel for any pair or basket (Agent Pear Statistics).

Rebalancing (beta)

By default, a $1,000 pair trade opens dollar-neutral: $500 of long exposure, $500 of short. As the trade moves in your favor, that balance drifts. Say the long rises to $550 while the short falls to $480. You are now net long the market ($550 vs $480), and a reversal in the broad market can give back gains the pair relationship never produced.

An advanced trader rebalances by trimming the winning long and adding to the short; most traders simply close both legs together. Orchard gives you the choice:

• Custom inception split: choose how much long vs short at open (e.g., 60/40 instead of 50/50).
• Partial closes: take the drift off one side without closing the position.
• Auto-Rebalance: let Orchard hold the position on target instead of watching it yourself (Auto-Rebalance).

Related: Auto-Rebalance · Agent Pear Statistics · Fees