Aug 6, 2025 · While traditional pairs trading relies on statistical correlation of returns, this paper explores a more robust approach based on cointegration of prices—a technique that captures …

In this paper, we propose a simple method of identifying close economic substitutes using cointegration. When a pair of stock prices is cointegrated, one series co-moves with a scaled …

Pairs trading is a market neutral strategy for profiting from short-‐term divergences in securities prices. The idea behind pairs trading is simple. Two securities are identified whose prices tend …

This tutorial will show how to construct a pairs trading strategy based on two instruments that exhibit cointegration, using CME WTI crude oil (CL) and ICE Brent crude oil (BRN) as an …

Feb 20, 2025 · By identifying pairs of assets that historically move together, traders can potentially capitalize on temporary deviations from this equilibrium. This article explores the theoretical …

rrent paper is to evaluate whether cointegration among stock prices is indee. a realistic a. tegrated stock prices, allowing for a exible speci cation of the. stochastic process that . set...

Apr 5, 2025 · Cointegration is a statistical technique that is widely used in pairs trading strategies. It is a powerful tool that can help traders identify pairs of securities that move together over …

Jun 22, 2023 · Pairs trade works best when the price of two positively correlated instruments diverges, with the underlying premise being that past performance will cause the prices to …

Jan 19, 2024 · We propose a two-step model selection procedure to determine the cointegration rank and the fittest VECM via the trace and likelihood ratio tests. We also derive an …

This work demonstrates a pair-trading portfolio design approach based on the cointegration of prices of stocks chosen from five sectors listed on the National Stock Exchange (NSE) of India.