Unlike directional strategies, dispersion trading is 

Are individual stocks moving together or independently?

In practice, dispersion traders typically:

investment banks, hedge funds, and volatility desks

 for decades, particularly in equity derivatives markets.

option markets often misprice this relationship

Dispersion trading exploits the gap between:

Let an index ( I ) consist of ( N ) stocks.

Dispersion traders are effectively trading the 

Historically, implied correlation is often 

6.3 ETF-Based Proxy (Retail / Simplified)

This makes dispersion particularly attractive for 

 that want correlation exposure without directional risk.

10.3 Intraday Dispersion (HFT / Quant Funds)