Retail shares are particularly popular amongst traders looking to play a recovery of the UK market. The sector itself has proved to be resilient in 2012 and has outperformed the FTSE 100 index benchmark. Shares that have outperformed include Debenhams, the department store and Dixos, the electrical retailer both of which traded relatively well during the year. Others like Marks and Spencer and Argos haven’t traded all that well
If the UK economy were to witness a recovery, some of the underperformers might trade better than the ones whose shares are already trading at very high levels. As such a pairs trade might work well; buying an underperforming share and selling the more expensive one with a perspective that the price differential between the two will narrow down.