Pairs Trading Example / Statistical Arbitrage Example

[RockinInRhythm]

It's not a _huge_ deal -- I imagine that particular pair is probably a money-maker (assuming you've properly subtracted out slippage and transaction costs) -- but the out-of-sample result here is deceivingly rosy. It looks like you've measured the cointegration test on the full dataset and picked the most highly cointegrated pair, which would include the "out-of-sample" data. Nevertheless, this was interesting. Thanks!

[psecondo]

Awesome!!

[joshuademoraes]

@psecondo what are that colored squares anyway? what have that to do with statiscal arbitrage?

[twills10000]

@joshuademoraes

It's just a reverse heatmap of the Augmented Dickey-Fuller test. In this case, the colder (more blue) squares represent the equity pairs that are more likely to be co-integrated.

[ip916a4bb]

Any more posts?