8 – M2L6 20 Summary V2

Now that you’ve reached the end of this lesson, we hope you’ve gained a better understanding of pairs trading and mean reversion in general. Remember that mean reversion trading follows these general steps. Find a pair of assets or a pair of portfolios that have some economic link, compute the hedge ratio, use the hedge ratio to compute the spread, test whether the spread is stationary, if the spread is stationary, consider the pair a candidate for mean reversion trading. Next, choose thresholds for the spread. When the spread widens beyond its historical average, short the spread. When the spread narrows beyond its historical average, go along the spread. Most important of all, remember to backtest your model. We hope you’ve enjoyed learning about mean reversion and pairs trading. Bye for now.

%d 블로거가 이것을 좋아합니다: