A fully automated expert advisor for arbitrage

Automated expert advisor that requires little to none configuration and follows the arbitrage logic outline below

Statistical Arbitrage, or Pairs Trading Strategy, is an extremely effective strategy, especially in developing markets which have high liquidity and significant arbitrage opportunities.  This strategy is based on the concept of  Mean Reversion of a pair. Here, stocks that exhibit historical co-movement in prices are paired using fundamental similarities. When one stock outperforms the other, the outperformer is sold short and the other stock is bought long. Here, the expectation is that the short term diversion will end in convergence. One of the major advantages of this strategy is that this strategy is Beta neutral and hedges market risk.

Let us understand this with the following example:

It is known from historical data that IndusInd Bank and Axis Bank share prices are highly correlated. If IndusInd Bank share prices rise by 2%, we know that Axis Bank share prices will rise by >1%. If they haven’t risen yet, Axis Bank shares can be bought to make a profit.