Bryan here again from QuantLabs.net. I’ve just posted something quite extraordinary and simple.
I’ve provided yet another R source code walk-through that demonstrates how to do market pairs trading.
Pairs trading is a market neutral trading strategy that works in virtually any market condition: uptrend, downtrend, or sideways movement. (It’s often categorized as a statistical arbitrage and convergence trading strategy.) When two historically correlated securities show a sudden weakness in that correlation, a pairs trader would short the outperforming stock and go long the underperforming one, betting that the “spread” between the two would eventually converge.
So how to do this in practise? The model I’ve provided will determine if the trend of a time series pair is mean reverting, as well as calculating the spread and the beta between two securities that could be part of a pair trade.
This demo covers everything:
* downloading the Yahoo Finance data
* doing a simple hypothesis test for stationary data, and even
* calculating probability values to help you decide if the time series is truly mean reverting (and therefore suitable to trade)
And remember, this tutorial is more than just ‘how to’ videos. It includes the full R source code which I’ve exhaustively tested for feasibility and functionality.
Get set up for pairs trading today:
A Premium membership also includes loads of tutorials and software for HFT software platform building. Plus exclusive algorithm courses too!
“Those that know, don’t tell. Until now.”
P.S. Premium members have been asking me how to do this or that, so I’ve been posting quick and easy solutions to help them pick up these technologies/methodologies ASAP.
The feedback has been very positive. And so we’re beginning to establish a good community of members able to help each other profit down the line as we build better algorithms, strategies and technology infrastructures for automated systematic trading.
As result, I encourage you to become part of this membership and get involved now.
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