On an absolute basis you have the idea, however to do this right you still have to account for differences in volatility. Compare the average true range of the two instruments. Check out the position siziing algorithm discussed in Acrary's posts. If you account for volatility differences you are probably in the right ballpark as to balancing the ES/ER spread. Lefty
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CORRELATION EminiS&P-Russel2000
- Thread starter NickBarings
- Start date
Quote from Lefty62151:
On an absolute basis you have the idea, however to do this right you still have to account for differences in volatility. Compare the average true range of the two instruments. Check out the position siziing algorithm discussed in Acrary's posts. If you account for volatility differences you are probably in the right ballpark as to balancing the ES/ER spread. Lefty
All that work for "Zero" consistency. Rock On!
Quote from riskarb:
Absurd... but funny
Before you downgrade my comment as just "funny" look at the following chart that has es and er2 adjusted by the value of their contracts, implied volatility and the point value. Do they look correlated to you? (Blue is es and green is er2)
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Quote from riskarb:
The [riskless] purchase and sale of two fungible securities... buying COMEX gold/selling LME. Option arbitrage: buying synthetic stock/shorting stock(reversal).
Thank you. That is what I thought. So, buying an adjusted value of es and selling a symmetrically adjusted value of er2 could be considered as arbitrage? Would you agree? Or I'm still missing something?
just joined this board. interesting because i know someone that blew out from trading the russell agaist the spu. he was a big shooter too. sad but true. i understand that you may use the relationship as a trading vehicle but that's all it is. its noise trading at best. but if you have the discipline to handle the loose correlation that's great.
just don't believe it too much that you blow out. not worth it
just don't believe it too much that you blow out. not worth it