Statistical arbitrage as one of the subsets of algorithmic trading refers to strategies that employ some statistical model or method to take advantage of what appears to be mispricing between assets while maintaining a level of market neutrality. One of these strategies More
Statistical arbitrage as one of the subsets of algorithmic trading refers to strategies that employ some statistical model or method to take advantage of what appears to be mispricing between assets while maintaining a level of market neutrality. One of these strategies is pair trading that implements on two related long-term(co-integration) financial assets. The pair trading strategy of the research is based on the description of the visible process, the remainder of the co-integration model in terms of an invisible mean reverting process. This representation is in a state-space model and solved by the Kalman filter approach and the time of buying and selling is calculated in terms of two probabilities of growth and fall. The profitability of pair trading strategy on 21 stocks from oil product index and basic metal index of Tehran Stock Exchange between 1390-1395 was evaluated according to return and Sharp ratio. The results of the research show that the research method has the daily returns of 0.0048 and Sharp 1.23, which is more profitable in comparison with the pair trading based cointegration and market performance but the average daily its return is in the second place after the co-integration method.
Manuscript profile
Algorithmic trading has become one of the main strategies in financial industry. This kind of trading involves trading strategies based on computer programs to decide whether to send their orders. Pairs trading strategy is one of the most popular and however, most under More
Algorithmic trading has become one of the main strategies in financial industry. This kind of trading involves trading strategies based on computer programs to decide whether to send their orders. Pairs trading strategy is one of the most popular and however, most understandable strategies in algorithmic trading. To implement a pairs trading strategy we can utilize several approaches or a combination of them. In this paper the distance approach has been considered. In this approach the two stocks that have least square distance between their normalized prices are being chosen for pairs trading. In this study, in order to implement this strategy, shares pair of metallic ores mining industry and price data in the year of 1395 have been selected. The strategies and the test, performance test trading strategies buy and hold strategy compared. In this paper all of stocks are selected from mining of metal ore industry during the first 9 months of the 1392 SH. Finally, the performance of pairs trading strategy is compared with buy and hold strategy and after that the favorable range of threshold and optimum threshold size is calculated.
Manuscript profile
In the current research,wavelet analysis is used to analyze the time series of prices in a pair of assets into general and detailed time series, and the property of collocation between different and corresponding levels of analysis of two series is checked in order to f More
In the current research,wavelet analysis is used to analyze the time series of prices in a pair of assets into general and detailed time series, and the property of collocation between different and corresponding levels of analysis of two series is checked in order to find collinear pairs at different levels of analysis. And then its profitability is examined. In this research, the profitability of the pair trading system based on wavelet analysis was investigated on 14 indices of the Tehran Stock Exchange betwee 2013-2022. The results show that for the second level of detail in the wavelet analysis, the results are quite impressive and the number of trading positions is more than doubled, the daily return is increased to four times and the Sharpe ratio is also increased to about two times. The system formed based on the first level of detail also has a better profitable performance than the normal aggregation, and the performance of the third level of detail is within the limits of aggregation. In addition, the average duration of the transaction also shows significant decrease in the first and second levels. Profitability performance at the level of general series is generally weaker than the aggregate.
Manuscript profile
Algorithmic trading system is a trading system that utilizes highly advanced models is used for trade decision-making in the financial markets. The System of "pairs trading" is also typical of these systems. Pairs trading system is one of the oldest systems of algorithm More
Algorithmic trading system is a trading system that utilizes highly advanced models is used for trade decision-making in the financial markets. The System of "pairs trading" is also typical of these systems. Pairs trading system is one of the oldest systems of algorithmic trading that its performance and profitability have been proven and shown in many of the studies that have been conducted so far in the financial markets. The most important principle in pairs trading is the equivalent long run relations or the mean reversion property. In this study, by calculating and evaluating the Sortino Ratio and return, performance of the pairs trading system has been surveyed through the cointegration approach in the Tehran Stock Exchange. The experimental results on pair stocks of selected in the Tehran Stock Exchange shows that using the pairs trading system as a market neutral trading systems has a significant return than return on ordinary shares in the same period.
Manuscript profile
The appropriate investment and decision making about taking of correct long and short position needs proved strategies. In this research, pairs trading have been studied and a new non-parametric approach proposed based on Renko and Kagi construction which are two Japane More
The appropriate investment and decision making about taking of correct long and short position needs proved strategies. In this research, pairs trading have been studied and a new non-parametric approach proposed based on Renko and Kagi construction which are two Japanese charting indicators. The proposed approach exploits information about the variability of spread process and a constant long-run mean dose not find for spread process but trade towards it like other methods of pairs trading and the only needed assumption is remaining constant of statistical properties of the spread process volatility. In this research, profitability of proposed method have been proved theoretically mean-reverting process with stochastic volatility , then pairs trading have been performed based on this approach on selective data of Tehran stock exchange . The results of implementation show that used strategy obtain 52.91% per return in stock pair of KHTRAC and KHTOGHA, 33.645 per return in stock pair of KHMOHAREKEH and KHODRO for appropriate selection of H.
Manuscript profile
Sanad
Sanad is a platform for managing Azad University publications
