Indicators: Cointegration

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Automated-Trading
148099
Automated-Trading  

Cointegration:

The indicator calculates and displays a linear relationship between two or more financial symbols.


Author: Maxim Dmitrievsky

franzzzz
38
franzzzz  
Automated-Trading:

Cointegration:

Author: Maxim Dmitrievsky

Hi @Maxim Dmitrievsky,


Great Indicator. I just have a few clarifications.


1. If I have a mix pairs of XXXUSD and USDXXX, does it convert all USDXXX to XXXUSD?

2. Im assumming it is using Johansen test to test multiple relationships and getting the Beta to form the Linear cointegration relationship and have a basis for Z-score probability? How does it work?


Thanks!


regards,

Francis

961011
6
961011  
Automated-Trading:

Cointegration:

Author: Maxim Dmitrievsky

961011
6
961011  
961011:
thanks
...
706
...  

franzzzz:

1. If I have a mix pairs of XXXUSD and USDXXX, does it convert all USDXXX to XXXUSD?

2. Im assumming it is using Johansen test to test multiple relationships and getting the Beta to form the Linear cointegration relationship and have a basis for Z-score probability? How does it work? 

1. no, it doesn't convert anything to the currency of your deposit, so it will not work properly for USDCHF, EURGBP, USDCAD, etc 

2. no, it's using simple linear regression between multiple assets and then divide all charts by Standard Deviation to make it look like flat channel 

Eliasxenos
15
Eliasxenos  
Can you clarify what the 0 line signifies?  It's little confusing to me how the lines oscillate between positive (above the 0) and negative (below the 0) when standard deviations cannot be negative.  Thanks!
bqFX
6
bqFX  

So, it does not give any clue whether the paired assets are cointegrated or not, doesn't it?
It just use simple regression to find the beta and coefficient, and get the error (or spread), and then divide the spread by its standard deviation to get the signal. Am I right?

Thanks Maxim.

Maxim Dmitrievsky
29537
Maxim Dmitrievsky  
bqFX:

So, it does not give any clue whether the paired assets are cointegrated or not, doesn't it?
It just use simple regression to find the beta and coefficient, and get the error (or spread), and then divide the spread by its standard deviation to get the signal. Am I right?

Thanks Maxim.

yes, without tests on cointegration

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