Short Selling (Relative Series)

Algo Trading Business
1
In the short selling course, it calculates the relative series by taking stock_price/(benchmark * exchange rate), I have two questions regarding this:
 
1. If I'm only trading US stocks with US dollars, do I still need to perform this calculation since the benchmark and exchange rate are the same for all US equities?
 
2. For the exchange rate, which currency should be numerator and which currency should be denominator? 
From my understanding, the currency which I used to trade should be the denominator and the currency of the exchange where the stock is listed should be numerator, right? 
2

Hi Zuo,



Please find answers to your questions inline:

 

1. If I'm only trading US stocks with US dollars, do I still need to perform this calculation since the benchmark and exchange rate are the same for all US equities?

No, it won't be required if all the stocks are based on the same country and currency.
 
2. For the exchange rate, which currency should be numerator and which currency should be denominator? 
From my understanding, the currency which I used to trade should be the denominator and the currency of the exchange where the stock is listed should be numerator, right? 

Yes, your understandign is correct.
3

For the first question, would it be useful to take off the benchmark effect by just dividing by the benchmark? or do you think it is unnecessary?

4

If the stocks are from the same exchange then it would not be necessary.