Another name for a spread trade but done with 2 stocks, usually from the same sector. Buying a CFD on Barclays and selling short HSBC is an example. The trade makes money if Barclays outperforms HSBC in either an up or down market. More information on Pairs trading - Click Here

The pairs trade was developed in the late 1980's by quantitative analysts. They found that certain securities, often competitors in the same sector, were correlated in their day-to-day price movements. When the correlation broke down, i.e. one stock traded up while the other traded down, they would sell the outperforming stock and buy the underperforming one, betting that the "spread" between the two would eventually converge.