Re: Speaking of Stock Portfolios
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you might feel that drug companies in general are undervalued and trade them actively by selling the expensive ones in the group and buying the cheap ones
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Your alternative is to buy the cheap sectors and sell the rich sectors. By pairing longs and shorts within a cheap sector (diagonal pairs trading), you are cancelling out a potentially profitable sector bet (assuming you are net flat the sector). I would tend to trade diagonal pairs (cancelling out my net sector exposure)in sectors for which I lacked any broad conviction, rather than in sectors which I believe are cheap (good long candidates) or rich (good short candidates).
Of course, alot has to do with your portfolio objectives and your particular skills - some people are good at playing broad sector themes, but terrible at picking individual stocks.
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