Software for historical testing of pair trading

T

trillenium

I am looking for a software that can historically test trading stratgies on pair trading. Lets say correlation between two stocks is very high and gets out of sync for a while. Normally traders sell one and buy the other. But how much profit does that really generate ? What are the drawdowns of such a strategy ? How about i do that on a whole portfolio of different pairs ?

I want to test this and see whether this really works. In most testing software packages i can only buy or sell one market -- I need to buy one market and sell another in a certain ratio and then look at historical results.

Anybody know a software that can do this in an easy manner ?
 
Quote from trillenium:

I am looking for a software that can historically test trading stratgies on pair trading. Lets say correlation between two stocks is very high and gets out of sync for a while. Normally traders sell one and buy the other. But how much profit does that really generate ? What are the drawdowns of such a strategy ? How about i do that on a whole portfolio of different pairs ?

I want to test this and see whether this really works. In most testing software packages i can only buy or sell one market -- I need to buy one market and sell another in a certain ratio and then look at historical results.

Anybody know a software that can do this in an easy manner ?
More...

Hi Trillenium,

I think you should look at www.pairtrader.com. Or contact Don Bright on this one.

-SL
 
This isn't too difficult to do in Excel. Just create a matix with archival price data of an entire industy and regress the returns. You can pull the prices for free from Yahoo and the fucntions for statistical analysis are build into excel.
 
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