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Trade the volatility difference between two stocks

Consider two companies A and B. Suppose that

  1. the two companies are in the same sector and the prices of A and B have a very high coefficient
  2. A and B have high volumes and large market capitals (so that they cannot be easily controlled by some specific hedge funds or institutions).
  3. while their prices are very correlated, A is more volatile than B in almost all time intervals. In other words, A has a higher beta than B (or equivalently, when they are increasing, A increases more; but when they are decreasing, A also decreases more).

Is there a delta-neutral stock trading strategy to profit from these assumptions? Note that here first, I am asking for a stock trading strategy. I do know some strategies in options. Second, I want it to be delta-neutral, meaning that I do not need to predict the moving direction of A and B. Otherwise, one can simply buy A and short sell B when he/she expects they will be up and short sell A and buy B when he/she expects they will be down. But the problem is that it is very difficult to predict the moving direction of them, especially in a short term. What I want to focus on is merely the fact of the volatility difference that A is more volatile than B. Thank you!

Submitted August 07, 2022 at 01:45AM by Edu_Dr0
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