I have done some analysis of various pairs of tickers on the NYSE. I did a brain dead algorithm to come up with all combinations of pairs and then checked all pairs for cointegration/stationarity.
I found one pair that backtested to 40% returns over the last year. But the components of the pair are totally unrelated, not even in the same sector, I cannot dream up a scenario that explains the cointegration. So I guess it's down to luck and I should leave it alone.
How should I have gone about my search? Start with a particular sector? Is there a systematic way of finding candidate pairs?