Strategic asset allocation combined with pair trading creates a robust portfolio management approach that balances long-term strategic positioning with short-term market-neutral opportunities.

Strategic asset allocation involves long-term focus by setting target allocations based on long-term objectives, diversification by spreading risk across different asset classes, periodic rebalancing to return to target allocations, and systematic risk management through strategic allocation.

Pair trading complements strategic allocation by providing market-neutral returns uncorrelated with market direction, adding uncorrelated alpha sources for risk reduction, exploiting temporary pricing inefficiencies for enhanced returns, and providing tactical opportunities within the strategic framework.