Econometrics: bibliography - page 16
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what does this have to do with correlation? - pairs can diverge even with 100% correlation.... it's more about a neutral-market portfolio :-)
and highly correlated instruments require active leg manipulation - you can't just plug in two instruments and take profits...
what does this have to do with correlation? - pairs can diverge even with 100% correlation.... it's more about a neutral-market portfolio :-)
and highly correlated instruments involve active leg manipulation - you can't just stick two instruments in and take profit...
1. What is a "neutral-market portfolio "?
2. What are legs?
3. what is active leg manipulation?
4. just plugging in two instruments and making a profit is not going to work... - why? What about paired trading?
1 - nrp - one in whichinstruments (lots) are aligned in volatility...
2 - legs - slang name for instruments used in paired trading - unlike "hands" trades of different direction for the same instrument...
3 - as an example - share to a positive leg - hoping that the total profit will reach +++ on a calculated level...
4 - just opening two positions from the spot and calling it "pair trading" does not work :-) In pair trading you selectinstruments + calculation (application) of the levels (algorithms) of shares + formalizing rules of entering-holding-closingpositions:-)
1 - nrp - one in whichinstruments (lots) are aligned in volatility...
2 - legs - slang name for instruments used in paired trading - unlike "hands" trades of different direction for the same instrument...
3 - as an example - share to a positive leg - in the expectation that the total profit will reach +++ on the calculated level...
You can't just open two positions from the scratch and call it "paired trading".-) paired trading involves selection oftools + calculation (application) of the levels (algorithms) of shares + formalizing the rules of entering-holding-closing positions.)
Is it roughly clear what the algorithms are based on? Exactly?
"What's that got to do with divergence? - A pair can diverge and at 100% correlation" - here I will not agree probably, as far as I remember from the statistics course at university, then at 100% correlation of anything or divergence cannot be, as far as I remember)) pair Eurobak and poundbak correlate, the question when this very state pairs called the standard correlation, and when there is raskorrelation and what exactly the method to determine this very "abnormality" that time to enter the transaction and earn on this most abnormal- raskorrelation? Or maybe I just slept through the lectures on statistics)))
" whichinstruments (lots) are aligned on volatility..." - what exactly is the method of calculating lots? one pair sold 0.5 lots, another sold 0.67 - how exactly is this determined?
See details in Leonid's topic - Quasi-arbitrage in short-term trading - read - many questions are explained...
1 - nrp - one withinstruments (lots) aligned by volatility...