Introduction to Pairs Trading
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- Опубликовано: 26 июн 2024
- Pairs trading is a form of mean reversion that has a distinct advantage of always being hedged against market movements. It is generally a high alpha strategy when backed up by some rigorous statistics. This notebook runs through the following concepts
What is cointegration?
How to test for cointegration?
What is pairs trading?
How to find cointegrated pairs?
How to generate a tradeable signal?
The notebook is intended to be an introduction to the concept, and whereas this notebook only features one pair, you would probably want your algorithm to consider many pairs at once.
Please find all the lectures here: www.quantopian.com/lectures
To learn more about Quantopian, visit us at: www.quantopian.com.
The notebook was originally created for a presentation at Harvard’s Applied CS department and has since been used at Stanford, Cornell, and several other venues. If you’re interested in learning more about how Quantopian is being used as a teaching tool at top universities, please contact me at delaney@quantopian.com
Disclaimer
Quantopian provides this presentation to help people write trading algorithms - it is not intended to provide investment advice.
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For multiple comparisons, just divide p value with number of comparisons and that is your cut off value. It is called Bonferroni correction
video is very helpful for the study
Hi all,
Great video. Thanks!
I have probably a very basic question. If lets say for pair trading analysis I am using ln(prices) and I determine my beta or the hedge ratio, and lets say we have checked and are fairly certain that this is indeed a pair driven by some fundamentals. Now, when we actually put the trades in, do we trade with this beta determined using ln prices, or do we need to make some adjustments for using ln prices?
Thanks
Vin
Having trouble checking the link to the site. Was hoping to be able to check some of the python code for the random walk data sets.
Awesome work but you made shorting sounds very complicated more than what it should be. ( in my opinion)
you simply could say shorting is borrowing a product for a fee, sell it in the market for a high price hoping it would get cheaper, buy it back and turn it back to the loner and keep the cash difference .
you guys are awesome :)
okay. video is good. how to take trades in live market ? how to calculate these things when we are in live market ?
Hi what is that balance( Traju) symbol on trading view chart
Listening to the soon to be the greats!
I don't understand why you have to use synthetic data instead of real data?
Hello! Thank you for the video. Why is not the same result coint(S1, S2) and coint(S2, S1). How to chosse the order of the variables??
The p-values should be the same for coint(S1,S2) and coint(S2,S1). The scores should be opposite in sign.
@@theliftedbar4610 Not true. Regression S1 on S2 is not the same as S2 on S1. In one you minimize the vertical residuals the other the horizontal. In one case it will lead to a much more significant lambda test statistic (what the ADF is based on )
watch these at 2x speed.
Anyone able to get the rolling beta to work? Nothing but errors
Sir, Have you tried pair trading forex using rsi7 ,rsi14,rsi30 (add them up for comparison) say on hourly chart & selling strong pair & buying weak pair--pairs have to be highly correlated(eg aud/usd and nzd/usd OR dow30 & sp500).One can do this on any correlating underlying stocks/commodities/futures/crypto/bonds. Trading on hourly charts there would be tons of opportunities all year around.
Seven years ahead of your time with the time stamps 🤣😂🤣😂🤣😂🤣😂🤣😂💎💎💎💎💎💎💎💎💎💎
This is 'introduction to pairs trading' lol.
"Cointegration extracts a sideways market from two different trending markets through a linear regression" .... it's pretty simple definition, dude. You sound like you are giving birth every time you try to define it. Very surprising since you have probably had to define it a million times ;-)