Testing for Cointegration for Statistical Arbitrage and Pairs-Trading Strategies (Python)

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In this lecture we'll use cointegration in Python to find long-term relationships between 2 assets (stocks in this case). It is crucial to know the difference between correlation and cointegration. Correlation is just short-term relationship between 2 random variables.

In our trading strategy we want to find assets (stocks) that are correlated on the long run. This is why we have to use cointegration instead.

✔️ this is the first step in mean-reverting trading strategies (pairs trading and statistical arbitrage)
✔️ if we can identify a single pair of assets that are correlated on the Long run - we can use it in our trading strategy
✔️ we can use linear regression (on historical data for the past 90 days) to determine the hedge ratio (so the position sizes of the short and long positions accordingly)

You can learn about how to implement it in Python and Backtrader in the bootcamp!

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Видео Testing for Cointegration for Statistical Arbitrage and Pairs-Trading Strategies (Python) канала Global Software Support