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2 Boring Pair Trades to Spice Up Your Returns

MINNEAPOLIS (Stockpickr) -- What's wrong with boring? In the stock market, "boring" gets the short end of the stick. The much-maligned buy-and-hold strategy, for example, is too boring. Investors want to make money and make it fast.

On the other side of the coin are such terms as "day trading," "program trading" or "quote stuffing," an alleged cause of the 2010 flash crash. It's enough to make your head spin. Jack Bogle is right when he says the game is rigged. But Bogle's "boring" index-based buy-and-hold approach isn't as appealing to investors who look at today's market and don't see much change from 10 years ago.



>>5 Stocks With Big Downside Potential

An alternative to buy-and-hold investing is another boring strategy: an absolute return strategy using pair trades. Offsetting a long position with a corresponding short position is far from sexy -- in fact, it pretty much guarantees that you will lose money on one side of the equation. But if you're more right on the other side than you were wrong on that side, it can result in overall slow and steady positive returns while protecting your portfolio from the whiplash losses of rapid-fire trading.

With pair trades, I often look to exploit short-term pricing inefficiencies. Today, though, I'm going to go longer-term and seek out pair trades that should work for as long as three to five years.

The key to a longer-term pair trade is to find the stock on the long side that will stand the test of time. On the flip side, we can short companies with fundamental flaws that are likely to be exposed over the long haul.

Here are boring pair trades to consider for your absolute return portfolio.

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