Statistical Pairs
Statistical Pairs trading identifies two assets with historical correlation and cointegration. When the price spread between the pair deviates significantly from its mean (measured by z-score), the strategy takes offsetting positions expecting the spread to revert. This market-neutral approach profits from relative performance differences.
Strategy Overview
Strategy Parameters
Historical period for cointegration test
Spread deviation threshold for entry
Spread reversion level for exit
Minimum correlation for pair selection
Entry Signals
Advantages
- Market-neutral approach
- Lower volatility than directional trades
- Strong statistical edge
- Diversification benefits
Risks to Consider
- Correlation breakdown during crisis
- Double exposure if both legs move against
- Liquidity imbalance between pairs
- Extended divergence periods
Related Strategies
Important Risk Information
Past performance does not guarantee future results. All trading strategies involve risk, and you may lose some or all of your invested capital. The win rates and Sharpe ratios shown are based on backtesting from 2015-2024 and may not reflect future performance. Always use proper position sizing and risk management.