Does simple pair trading work in the forex market? An empirical approach = ¿Funciona la estrategia de Trading Simple de Pares en el mercado de divisas? Una aproximación experimental

Pairs trading is a well-known and widely used strategy in the financial industry. Many academic papers have been published regarding to this topic, mainly applied over samples in the stock markets. This project attempted to analyze the application of a simple pairs trading rule in the Foreign Exchange Market, until now poorly approached.
Therefore, our aim with this work was to address, through an empirical analysis, a market-neutral strategy that takes into account pairs of exchange rates that “move together” and exploits their plausible inefficiencies. Based on a co-integration model, we designed and tested the strategy, which surprisingly yielded valuable evidence of its potential scope.
The sample employed for the development of this project included 9 of the most liquid currencies in the market, from 2010 until 2014, so it was possible to open and close positions at the right moment without delays.