A pairs trade is when you are long one security, and short another. The variety of a pairs trade can differ in terms of dollars, number of shares, or differing ratios on either dollars or shares. There are many criteria one should consider before a pairs trade is placed, there are also several risks that must be addressed beforehand. This educational piece addresses some of the criteria. Due to the educational theme, please do not construe the information to follow as a recommendation to buy/sell any security mentioned.