Understanding Pairs Trading in Algorithmic Trading

Algorithmic trading has significantly transformed the equity markets by enhancing trading efficiency and liquidity. It involves the use of complex mathematical algorithms and automated systems to execute trades at high speeds. However, participants in the market should be aware of the distinctions among the types of algorithmic strategies. One popular strategy is 'Pairs Trading'.

Which of the following statements best describes 'Pairs Trading' as an algorithmic trading strategy?