If I see it right in your formula the shorter time frame has been overweighted which makes sense to me as stated. I dont know you're using PTF, or an excel sheet. But it probably would be a good idea to put this formula in a graph calculation to get an overall glance about the stability of a pair. Just my 2cents.
Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
If I see it right in your formula the shorter time frame has been overweighted which makes sense to me as stated. I dont know you're using PTF, or an excel sheet. But it probably would be a good idea to put this formula in a graph calculation to get an overall glance about the stability of a pair. Just my 2cents.
Dr Who,
I'm interested in your trial. What is you overall Win/Loss Probability? You seem to suggest 69%
Furthermore, what is your average win/loss ratio ie the average of your winning positions divided by your losing positions?
I've noticed a strange occurance with my portfolio of pairs.
Even though I am following Johnny's suggestions, and trading dollar neutral, so i'm short and long an equal number of equities and $$ figure, my portfolio seems to either stand still or creep forward an inch during positive days, or bound ahead on negative days. (sentiment determined by the closing price of the major indexes).
I have only just recommenced trading, so I'm only talking about 2-3 weeks of data, but it's quite peculiar.
Adrian
Even though I am following Johnny's suggestions, and trading dollar neutral, so i'm short and long an equal number of equities and $$ figure, my portfolio seems to either stand still or creep forward an inch during positive days, or bound ahead on negative days. (sentiment determined by the closing price of the major indexes).
I have only just recommenced trading, so I'm only talking about 2-3 weeks of data, but it's quite peculiar.
Adrian
Hi Tatankas,
No, no note of betas. It's not one of my filters, but occasionally I will check when something else looks a bit awry - like larger than normal price differences between the pairs.
I'm currently holding 6 pairs.
Adrian
If, your short-side beta is much larger than your long-side, you are losing market-neutrality, and in fact, betting that the markets will decline (what seems a good option, right now
).Can you get the beta((from yahoo) for your short stocks, and compare with your long stocks beta?
A beta unbalanced portfolio, is perfectly good explanation, in my opinion.
I figured I'd add them up just for the hell of it and see. The beta's average higher on the longs than the shorts (Yahoo data).....Quote from tatankas:
If, your short-side beta is much larger than your long-side, you are losing market-neutrality, and in fact, betting that the markets will decline (what seems a good option, right now
Can you get the beta((from yahoo) for your short stocks, and compare with your long stocks beta?
A beta unbalanced portfolio, is perfectly good explanation, in my opinion.
Average Beta Long: 1.324
Average Beta Short: 1.314
Nice and close tho, having not really bothered with it from the start.
There are some discrepancies in the individual pairs, however, and these pairs are some of the movers and shakers (ALL/CNA), so I think there is still validity in your hypothesis.
IAP.L/TLPR.L & AGU/POT in play