Originally posted on 07/15/2010:

Quote Originally Posted by sharpcat View Post
Assuming you have an estimated win probability for two players to win a tournament is it safe to use those probabilities for drawing a match-up comparison line or is there too much variance between winning the tournament and winning a match-up to use those numbers?
This is something that I look at to find profitable wagers (hedges). The closer the tournament is to the final, the more highly correlated the odds will be. It is not that the odds are necessarily less correlated the further out you go, it is just that there are many more possible combinations of results that impact the odds.

When I do this, I am not looking to create a line, I am looking for comparative pricing inefficiencies that can be used to create profitable hedges. The problem with creating a line is that you don't necessarly "know" which line is correct, the current game line or the line for the game created with the use of correlated markets. All I want to find is a disparity in the pricing between the the highly correlated markets and then I try to figure out the best way to exploit that disparity that gives me the best risk/reward.

Joe.