Practical Application: Set up a 1-for-1 outperformance strategy in your account

Stock A is trading at $75. Stock B is trading at $50. We think A is a better stock than B. How can we profit from our view?

We will need = 75 / 50 = 1.5 shares of #23 per 1 share of #24 to set up the trade.

We #25 300 shares of A and #26 #27 shares of B.

Based on this context, please answer the following three questions.

Scenario 1 (Good). A goes up by 20% while B goes up by 10%.

Our dollar gain on A is $

Our dollar loss on B is $

Our net gain is $ #28

Scenario 2 (Good). A goes down by 10% while B goes down by 20%.

Our dollar loss on A is $

Our dollar gain on B is $

Our net gain is $ #29

Scenario 3 (Bad). A goes down by 20% while B goes down by 10%.

Our dollar loss on A is $ #30

Our dollar gain on B is $ #31

Our net loss is $ #32