Pair trading in crisis

The financial crisis has become a good test for the correlation and cointegration of pairs. For example, pairs like V*200-MA*100, AMLP*300-XOM*200, retained their character behavior and did not fall apart.

V*200-MA*100

pair V200-MA100

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VSA – analysis on february 2020

In CMCSA 02/21/20 I bought put options with 42.5 strike. The general mood is to drop the market due to the situation with coronavirus. In the CMCSA, on the weekly chart there was an aptrust signal (false breakdown) and a test of this aptrast on low volumes.

CMCSA week

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The strategy of statistical arbitrage on the US stock market

This article is aimed on those who haven’t been familiar with the strategy of statistical arbitrage, pair trading, but would like to try this trading strategy in practice. I focused especially on the practice. In this article, I’ll give you all the tools you need so that you can quickly set up free and open source software, start trading, quickly evaluate a strategy, and decide whether it suits you or not. According to the theory of statistical arbitration, there are a lot of free access materials, and as long as you understand correlations, cointegration, stationary time series, highly specialized software, enthusiasm may disappear. I would not like your interest to disappear, because strategy is very interesting, especially in terms of stability of positive transactions execution.

First of all, I would like to say about the disadvantages of the pair trading strategy. This strategy requires significantly more capital than trading a single instrument. You need to open a position in long on one stock and in short on another stock, and with a different volume on each side. To diversify risk, you need to open positions in several pairs. Next, you need a broker who provides the opportunity to trade fractional lots so that you can set the exact ratio of the volume in the pair. Even fewer brokers can provide large shoulders (4th, 5th leverage) to transfer positions to the next day.

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