The Elite Circle - CADF (Cointegration - Augmented Dickey-Fuller Test)
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CADF (Cointegration - Augmented Dickey-Fuller Test) 5 *
Augmented Dickey-Fuller Cointegration Indicator, Version 1.01
5/23/2012: Moved ALGLIB routines to separate ALGLIB "Indicator". No functionality changes.

This is posted for BMT Elite Members Only. Please do not share or distribute.

This indicator plots the augmented Dickey-Fuller statistic for residuals from a cointegrating regression. It can be used to show the probability that the prices of 2 instruments are "cointegrated". It would normally be used on daily data with a fairly long period.

It is based on (and was tested against) MATLAB code by James P. Lesage, posted at

Some numerical methods use code from ALGLIB (required ALGLIB "Indicator" included)

Recommended Reading: "Quantitative Trading" by Ernest P. Chan
also his blog at

The horizontal lines plotted by the indicator are the "Critical Values" for 1% (lowest line), 5% and 10% (highest line) levels. The indicator plots the statistic; lower values represent increasing likelihood of cointegration.

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May 16th, 2012
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