Parameters Optimization of Pair Trading Algorithm
Charles Barthelemy, Ruoyu Chen, Edward Lucyszyn
TL;DR
This paper investigates the mathematical basis of pair trading, emphasizing parameter optimization to enhance profitability and robustness in volatile markets through cointegration and signal construction.
Contribution
It introduces a novel approach for optimizing pair trading parameters based on cointegration analysis and signal generation techniques.
Findings
Optimized parameters improve trading profitability.
Strategy remains effective in volatile markets.
Cointegration-based signals enhance trade accuracy.
Abstract
Pair trading is a market-neutral quantitative trading strategy that exploits price anomalies between two correlated assets. By taking simultaneous long and short positions, it generates profits based on relative price movements, independent of overall market trends. This study explores the mathematical foundations of pair trading, focusing on identifying cointegrated pairs, constructing trading signals, and optimizing model parameters to maximize returns. The results highlight the strategy's potential for consistent profitability even in volatile market conditions.
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Taxonomy
TopicsScheduling and Optimization Algorithms · Customer churn and segmentation