Credit-Equity Correlation Strategy

Introduction

Jim Delaney has been the manager of Market Strategies Mgmt., Inc., an independent research provider, since 1995.  The Firm’s research encompasses both long and short investment ideas generated through company specific Credit Default Swap and stock valuations.  Follow Jim's CEC Blog where you'll find tips, strategies and commentary on important market and trading issues that can help your business.

Strategy Overview

The Credit-Equity Correlation Strategy trades large and mega cap stocks, 90% of which are in the S&P 500 Index. All of the risk taken by the strategy is in the equity market. The CEC Strategy uses information gained from the level and movement of single name Credit Default Swaps to generate the buy and sell signals it uses to trade the stocks in its portfolio.

This Strategy does not trade any CDS contracts nor does it arbitrage one market against the other. The Strategy simply uses information garnered from the single name CDS market to make trading decisions on equities.

The Strategy has the best of both worlds in that it uses information from the credit markets, not normally used in Equity analysis, and trades in only the deepest and most liquid stocks.

Trader Background

Jim Delaney has over 25 years of Wall Street experience trading and managing risk in multiple markets. Jim initially traded High Grade Corporates for Drexel Burnham.  This experience provided an in-depth knowledge of credit spreads as well as how and why they move.  Later in his career Jim was Chief Dealer of Interest Rate Options for Barclays Bank Plc. in New York . At Barcleys' Mr. Delaney gained practical knowledge of the derivatives market as well as how to manage option risk.  Additionally, Jim has built technical trading models and managed commodity portfolios for Tamiso & Company a CTA that has been in business since 1983 as well as his own small CTA, Market Strategies Mgmt., Inc.

These experiences formed the pool of knowledge from which Jim drew to build the CEC Strategy. A practical, in-depth understanding of credit spreads and optionality combined with well disciplined risk management learned from the commodity markets all join together to produce a trading strategy that produces high quality, low volatility returns.