How to automatically find pairs for a pair trade?

P

pisco

Hey guys,

I want to implement a R script which gives me automatically pairs to trade. Is there a ready made script or do you know any good tutorials?

How would you do that(would you use the Dick Fuller Test and run it over all 75000 yahoo symbols for example?)

I really appreciate your answers?
 
Just running stats on 75k stocks is a bad idea. You must have an intricate mix or filtering criteria based on sector, industry, country groupings etc. Just filtering using such criteria and looking inside each sector should reduce the 75k number to 1k or so per sector/per industry. My guesstimate.
 
Hello Pisco, I am running Dick Fuller Cointegration Analysis on a huge number of assets and have the hard and Software in place to analyze and trade successfully.
If this is not an "academic question" and you have the Money and interest to do this you can contact me via PM.
 
@gmst
Can you recommend some readings/tutorials/methods ect.


@all
What do you think about pairtradefinder.com?
 
Dick Fuller Cointegration is good but very complex because you have to do several test in front. You can plan a couple of week to fully understand and even longer till you have it running. They have a very good documentation in matlab.

Pairfinder is based on a old entry Level concept (cannot be compared with DF). They write their concept in the documents and it is easy to re program with the description. The results are not stable and it is a Kind of gambling, you will find better concepts if you search book stores.

Look for Kaufman book "Alpha trading - neutral trading to remove directinal risk" (or something like this), he gives the best overview about up to date Pairs concepts.
 
Quote from pisco:

@gmst
Can you recommend some readings/tutorials/methods ect.


@all
What do you think about pairtradefinder.com?
More...

This is a 224 page book, considered a classic in quantland. I haven't read this book however, so not sure how much emphasis it puts on fundamental factors while building pairs model. So, after you read this book, maybe you will get lots of ideas and will be able to use your creativity to build better trading models.

http://www.amazon.com/Pairs-Trading...24684&sr=8-1&keywords=pairs+trading+ganapathy
 
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