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stats arb on NT
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stats arb on NT

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stats arb on NT

Has anyone experienced in statistical arbitrage ever though about the best ways to look at that in NT?

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Been looking at usa/cad versus eur/usd...


Typically you apply a factor to obtain a ratio. For discussion here you could use cad x 1.2 or euro x .8. In other platforms it is as simple as typing the equation in to the quote field. Stronger issue minus the weaker issue X factor.

Something like Eur/usd - (usd/cad x 1.2), then sell the weak one buy the strong one or vice versa as a reversion to the mean (normal relationship)

Is anyone or would anyone want to work on that type of idea?

Yes, I know the description is vague and leaves of or has some incorrect assumptions...that is how I make sure a responder has experience not just interest. Wldman seeks collaborators not followers...sort of a you show yours I'll show mine proposition.

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Last edited by wldman; November 13th, 2012 at 12:13 PM. Reason: add chart
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I have no experience or in depth knowledge to offer, so please pardon me posting here none the less...
The only thing I have to offer would be help coding an indicator to chart that, a quick search in the download area yielded no results. So if you want to teach NT I'll be happy to hack away...

vvhg

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No experience either, but couldn't you just throw some type of BB around the pairs ratio? The periods and stddevs would be your magical numbers, but this would tell you if the pairs are behaving how they statistically have behaved over the last N-periods. You could further complicate things by throwing in the DX in there some how

London Calling
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Hi Victor..

In want everyone to reply that feels inclined to do so. Did not mean to limit response but rather to condition readers to remain readers if there where others more able pitching in. That was an error. Sorry for being a jerk.

The "tunnel" and the stats arb are compliments. I think Im more interested in the arb right now.

Let me work out some ideas and hopefully collect some here from others. Thanks for speaking up.

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Yes

@Xav1029 that is correct.

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The correlation indicator in THIS thread could serve as a basis for creating a delta chart of some kind. The issue seems somewhat tricky as one has to make sure the dataseries are synchronized to each other, might be an interesting read, @Xav1029.
I think it is time to code something like that, or is it already around and i just overlooked it?

vvhg

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Okay

@vvhg

I'm sure that it exists out there in great frequency, for that matter. Is there more value in using a model or in building one?

How would we find the relationship of period closing prices over time for two or more highly correlated or inversely correlated products?

We might then apply a factor to one product in an attempt to make the trade dollar neutral.

So we have this typically normal spread between two products. When it is out of whack we want to sell one and buy the other one. Bollinger would be a good basis, but is volatility valuable or not. Keltner might work too, no vola hitting that...or less anyway. Ideally the less the channel waves up and down the better, I think Also, the less the channel converges and diverges the better.

We establish a channel, then when we are at some high level we sell the over valued and buy the undervalued.

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individual charts


So I wonder what a ratioed symbol plotted on a single chart would look like. Could you trade that a la reversion to the mean?

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