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Pairs trading Matlab
Started:February 13th, 2015 (09:31 PM) by alecase Views / Replies:450 / 1
Last Reply:February 13th, 2015 (09:31 PM) Attachments:0

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Pairs trading Matlab

Old February 13th, 2015, 09:31 PM   #1 (permalink)
Trading Apprentice
ottawa canada
Futures Experience: Beginner
Favorite Futures: es
Posts: 4 since Oct 2014
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Pairs trading Matlab

good morning everyone
I'm developing a pairs trading strategy.
I found a part of a code (matlab) on the internet but I could not understand how it works

I could not understand how the final return is calculated in this part of the code.

r4 is the total return vector

'series' represents the prices of companies.

s(i:i+N-1, 2) = (res/reg1.RMSE > spread)- (res/reg1.RMSE < -spread);
s(i:i+N-1, 1) = -reg1.coeff(2) .* s(i:i+N-1, 2);

r = sum([0 0; s(1:end-1, :) .* diff(series2) - abs(diff(s))*cost/2] ,2)
title(['Final Return = ',num2str(sum(r4),3),'(',num2str(sum(r4)/mean(series2(1,:))*100,3),'%)'])

specifically I'd like to learn the reason of the division of sum(r4) to the mean.


thank you so much for your time and cooperation,


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Old February 13th, 2015, 09:31 PM   #2 (permalink)
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