Please state the pros and cons of portfolio trading. - page 9
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And I kind of doubt that cointegration in its pure form exists in forex - it would mean a risk-free TS based on paired trading (for classically cointegrated series the spread is guaranteed to tends to 0)
No, it would not))
no, it wouldn't))
why?
no, it wouldn't))
Have you ever met an example of pair trading for two instruments that are cointegrating and have low correlation?
Yes, I've seen it in practice.
Do you have any experience of using the PairTrading package?
It's a very primitive package judging by the documentation, actually a wrapper around lm() and adf.test(). The urca package is much more useful.
The approach implemented in this package has been implemented and used.
I doubt that pure cointegration in forex is present - it would mean a risk-free TS based on paired trading (for classic cointegrated series the spread is guaranteed to tends to 0)
I'm not even saying anything about pair trading on forex, because I am of the opinion that it is impossible on currencies :)
Yes, I have encountered this in practice.
Yes, I have encountered it in practice.
It's a very primitive package according to the documentation, actually a wrapper around lm() and adf.test(). The urca package is much more useful.
The approach implemented in this package has been implemented and used.
I'm not saying anything about pair trading on forex, because I'm of the opinion that it's impossible on currencies :)
Where can I find it?
Unfortunately, it is not available (NDA).
Unfortunately it is not possible to read (NDA).
clear...... There is no such example.
Co-integration in trading is purely theoretical. In practice, quotes do not have classical cointegration and arbitrage as risk-free trading in pair trading is impossible.
In practice equilibrium trading is based on correlation and one has to put up with strong changes in the correlation coefficient in the course of time.
why?
Because cointegration means that there is a stationary linear combination of non-stationary series. Stationarity does not mean risklessness - there is variance
Don't you have any experience of using the PairTrading package?
Because cointegration means stationary linear combination of non-stationary series. Stationarity does not mean risklessness - the variance is present
The real spread for cointegrated processes ALWAYS converges because it is a stationary process. And to hell with variance - it does not tend to infinity.
)))If this variance didn't exist - it would be impossible to build a TS. After all, the TS would exploit exactly the dispersion of the spread