Back in January, on the old blog, I mentioned this Altman Z”-score pairs trade:
As of Friday’s close, Short Screen showed an Altman Z”-Score of -0.13 for Trico Marine Services (Nasdaq: TRMA) and an Altman Z”-score of 9 for Oceaneering International (NYSE: OII). Recall that Z”-scores below 1.1 indicate financial distress and risk of bankruptcy, and scores above 2.6 indicate financial strength (scores in between are in the gray zone). Today I shorted TRMA at $5.31 per share and bought an equivalent dollar amount of OII at $64.70 per share.
I had a sell stop limit order on the OII, and when it hit within a couple of weeks, I went ahead and covered the short of TRMA, as I mentioned on the Short Screen message boards at the time. I netted a small gain on the pairs trade (6.5%), but, in hindsight, I would have been a lot better off letting both positions ride. See the graph below.
TRMA versus OII
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