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Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
Quote from amitkumar_ny:
Backtesting does show it gets better with high co-integration. don't know if same magnitude with increasing correlation pairs...maybe i will run a comparison..profitability at 80, 90 and 99 % correlation and cointegration..
I have done some quick comparisons between high correlation and high cointegration with PTF 3.01 and I am seeing much better results with cointegration. Using the same groups of stocks/ETFs with a correlation of 80% or greater the average P/L for the group is about 1.5%. For high cointegration (.90 or greater) the average P/L is about 3%. This was just a quick comparison using the same groups of stocks and ETFs.
BD1, what I can't figure out about the new PTF, is if I should ignore all I did before and just rely on cointegration?
For example, before cointegration I used to look for this in my pairs:
1) Correlations above 90%
2) Ratio chart should show wide trading range or overextended
3) Correlation in an uptrend
4) +/- and % from mean charts at historical extremes
But now with cointegration, what's the point of any of these factors? Do they matter?
How do you do it?
For example, before cointegration I used to look for this in my pairs:
1) Correlations above 90%
2) Ratio chart should show wide trading range or overextended
3) Correlation in an uptrend
4) +/- and % from mean charts at historical extremes
But now with cointegration, what's the point of any of these factors? Do they matter?
How do you do it?
Basically I am just replacing correlation with cointegration in my process. I am using high correlation (.95+) as my first criteria. But then I am still apply all the other criteria like you mention in your post:
- a good ratio chart
- looking at news/earnings for stocks
- etc.
I am just using cointegration as a better starting point. It should be better if the math and theory of reverting to the mean is correct.
- a good ratio chart
- looking at news/earnings for stocks
- etc.
I am just using cointegration as a better starting point. It should be better if the math and theory of reverting to the mean is correct.
Quote from luxor:
I think I found my dream pairs trading program. If only it was commercially available:
http://www.youtube.com/watch?v=SSkaGf1Lr-U&NR=1
Ive tried talking to the guy. I was trying to get him to sell it but he suddenly stopped emailing me. Too bad its pretty quick.
Has anyone else experienced problems running PTF 3.01?
When I run the back tester and then try and find pairs it runs much much slower than the 2.99 version.
I ran 2.99 on my old computer and it too 2 min and 20 seconds to run with 10 stocks to find the 45 pairs. The new version on a new computer took 34 min and 15 seconds to run the same data.
Just wondering if I did something wrong in the installation or setup.
PTF has not responded to my request for help.
When I run the back tester and then try and find pairs it runs much much slower than the 2.99 version.
I ran 2.99 on my old computer and it too 2 min and 20 seconds to run with 10 stocks to find the 45 pairs. The new version on a new computer took 34 min and 15 seconds to run the same data.
Just wondering if I did something wrong in the installation or setup.
PTF has not responded to my request for help.
Quote from ascheer7:
Has anyone else experienced problems running PTF 3.01?
When I run the back tester and then try and find pairs it runs much much slower than the 2.99 version.
I ran 2.99 on my old computer and it too 2 min and 20 seconds to run with 10 stocks to find the 45 pairs. The new version on a new computer took 34 min and 15 seconds to run the same data.
Just wondering if I did something wrong in the installation or setup.
PTF has not responded to my request for help.
My PTF 3.01 is running fine. If anything, slightly faster than 2.99. I have been running lots of backtests of multiple stock groups. No issues other than I got a memory exception when I tried to backtest 5 stock groups at once. So I now just backtest 3-4 max at the same time.