Pairs trading quest for relevance

L

lamonte

Hey all
I am presently conducting research on pairs trading strategies, exploring their applications, and delving into broader issues related to them. Additionally, I am investigating the methods employed in the search for co-integrated pairs in the crypto space using the network science approach.

The problems currently exploring include the hypothesis that if truly effective pairs are identified and issues such as transaction fees and spreads are resolved, among others not mentioned here, this strategy could potentially become more usable.

Respectively, I am endeavoring to understand the direct reasons and facts behind why this strategy has lost its relevance and is no longer widely discussed.

Your input on this matter would be highly valuable.

Best
 
The devil is in the details. You need to find out the optimal settings around. Because if you have not good settings you can also loose. It is all about a meaningful approach, because cointegration has no meaning when there is no real relationship, as you get only spurious relationships with no predictive value. Second there are like every other strategy also drawdowns from time to time. Therefore it is even more important about finding the right settings and how to set any stops especially when the position is in floating loss. On crypto there is also the specialty that there are unstable exchanges where you could easily loose your deposits when hackers steal them. If you trade CFDs on cryptos you have higher spreads and swaps which eat in the pockets of pairs trading. Also the size and scaling around crypto is much limited in comparison to other asset classes. That is why any better strategy discussed around cryptos is not favorable as the edge could be vanished to easily when the alpha capturing around is too widely known.
 
Thank you TrAndy2022 so much for providing such detailed explanations of the issues. Your insights are invaluable, and your effort in outlining the problems is greatly appreciated.
 
You must log in or register to reply here.
Back
Top