Tom, Tony, and Pete look at a commodity currencies pairs trade between the Canadian dollar and Aussie Dollar. They focus on how we can use the daily standard deviation of the underlying and daily standard deviation of the pair to create expectations around price movement. We can make a directional play through a pairs trade between the Canadian $ and the Aussie $.
With the Canadian $ underperforming Aussie recently, tune in to see how the guys put together a "pairs" trade on these 2 active currencies. By trading a positively correlated pair, we can have a smaller expected daily move than either one of the outrights. With an assumption that the pair will widen, Pete believes going long the Canadian $ and short the Aussie $ is the best option.