For those who have (are) seriously engaged in co-movement analysis of financial instruments (> 2) - page 6
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With this method?
I suggest that those who disagree with this expression mathematically prove otherwise and present the evidence to the public.
In fact, you can have as many as ten:
Any good 3rd grader in secondary school is able to calculate correlation if it is explained to them how and what to add and multiply.
The subject of Pearson and Spearman correlation coefficients has been dealt with as much as possible on this resource.
Please stick to the topic of the thread, which has strict inequalities (> 2) in the title.
The theme (specifically at >2) is limitless.
Correlations are fine. The point here is to deal theoretically with cointegration (for three pairs tied in a ring, the cointegrating vector is elementary).
The main thing is to try to "correctly loosen" the cointegrating vector. Where to loosen it, with what criteria, is the question.
Equilibrium shape theory by mais_
( true for 2 )
The facts are there. You need a synthetic instrument to make some kind of economic sense (the sum of all pairs is what? and if I add up the prices of 40,000 instruments?)
And the facts are in the most prominent places. Instead of thinking it's better to take it on the chin, eh, sanyooooook?
To be honest, I can't even imagine such a technique. Especially since all the positions in the portfolio will have to be reversed during the rebound, and hence the loss of spreads for each pair. At least the channel levels should be wide enough to avoid significant loss of spreads on reversal. Not to mention that reversal of positions for the entire portfolio is not an easy task. Even pips traders who trade one pair on the rebound may have problems with reversing positions. And when there are a lot of pairs, we will have a lot of problems with occupancy of trade channels.
Portfolio of pairs bought and sold and held is another matter. Once you open it once, and if trends are stable, you do not need to reshake it. In some cases, it is only partially shaken.