Indicators: Institutional StatArb and Cointegration Spread Z-Score
a big mistake sorry guys gonna save you a lot of time it's not pair trading if both crosses shaire a currency if aud usd / nzd usd are traded you are litterally trading aud/nzd , basic math here , so yes they will show cointegration in pairs with very big mean property (eurgbp , audnzd ) the type of currency that are closely impacted fundamentally and it will look text book , but you are really just trading the audnzd pairs pair trade need to come from two distinc assets showcasing real cointegrated property
short half life on the spread deviation to mean, and absolutely need a dynamic spread as well as model reajustment this is a very very basic form of the idea
Institutional StatArb and Cointegration Spread Z-Score:
A quantitative multi-asset oscillator designed for Statistical Arbitrage (Pairs Trading), it calculates the logarithmic spread between two correlated assets and measures its Z-Score to identify risk-neutral mean-reverting opportunities.
Author: Amanda Vitoria De Paula Pereira