DHI*100-KBH*100. Correlations 0.85, p-value 0.04.
To calculate the correlation and cointegration of the pair, I used the portfolioiovisualizer.com service with the following parameters:
Pairs for May 2020
AVGO*300-MCHP*800. Correlation 0.79, p-value 0.01.
Pairs for April 2020
V*200-MA*100. Correlation 0.94, p-value 0.01. Cointegrated.
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*700-XOM*100, retained their character behavior and did not fall apart.
V*200-MA*100
Pairs for March 2020
XEL*300-AEP*200. Correlation 0.87, p-value 0.03. Cointegrated.
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.
Pairs for february 2020
SPY*100-XLK*200. Correlation 92, p-value 0.63. Not cointegrated.
FAS*300-SPY*200. Correlation 93, p-value 0.28. Not cointegrated.
Pairs for january 2020
SPY*100-XLF*1000. Correlation 0.86, p-value 0.01.
C*100-USB*200. Correlation 0.78, p-value 0.01.
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.
Working patterns for day trading on the US stock market
In this article, I would like to tell about several patterns for intra-day trading on the US stock market. These patterns worked and continue to work today. I would like to emphasize at once that the patterns discussed below work well in the stock market, not in the commodity futures or currencies market. The nature of the movements inside the day in the futures market, in my experience, is quite different. For those who are just starting to learn trading and who want to try themselves in intraday trading, I would advise the American stock market. It has a large number of tools, and every day there you can find papers with simple and understandable movements. Take one, two patterns maximum, the nature of which you understand, and look only for them. So, let’s move on to the patterns.
1. Pattern “first pullback at 10 o’clock”
This is my most favorite pattern, which always brought money. I had periods when, trading only it, I did not have any unprofitable trades within a month (doing daily 1-3 trades).
This pattern involves the search for active shares in which the trend movement begins or continues. In accordance with this model, in the first 30 minutes after opening of the market, the stock makes the first move at least for 3-4%. Further, at 10:00 – 10:30 we are waiting for the pullback, the formation of support and go from support in the direction of the trend, joining a strong player. We set the stop for the pullback. Trade of trends is the simplest and most reliable transaction.
Share of Intelsat S.A. (I) 13.07.2018 after the first pullback at 10:10 is fixed over a round number – a level of $ 20: