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by blade
November 30th, 2011, 10:33 am
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

<t>Ok, gotcha. Yup agreed that stock vs basket or basket vs basket is probably the way to go in order to potentially find something usable for trading. Essentially cointegrating vector > 2. Too easy to do the old simple pairs trade nowadays given tools like R etc and don't think there's much alpha l...
by blade
November 29th, 2011, 12:26 pm
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

Marine you've got me intrigued ... 3 legs as in something like triangular arbitrage ? Or more of a Johansen type approach ? ie cointegrated vectors with more than 2 dimensions ?
by blade
November 27th, 2011, 7:50 pm
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

Have a look at that. Should cover what you need to know, with prob sections 1.1 and 6.3 most relevant. http://www.yats.com/doc/cointegration-en.html
by blade
November 26th, 2011, 8:39 pm
Forum: Trading Forum
Topic: Algorithmic Market Making
Replies: 9
Views: 19496

Algorithmic Market Making

<t>Definitely seen studies using upstream vs downstream industries on commods like oil. As you say depending on prices the upstream guys like explorers drillers etc may do well vs downstream guys like the refiners. There are potential lead/lag, equilibrium relationships to find and exploit according...
by blade
November 26th, 2011, 5:16 pm
Forum: Trading Forum
Topic: Algorithmic Market Making
Replies: 9
Views: 19496

Algorithmic Market Making

<t>Whilst I agree with your points that possibly commods and equities don't mix, I've seen far too much correlation in extreme mkt conditions between say gold and certain gold mining companies, or silver and some silver mining companies to rule out that no one is trading one against the other at hig...
by blade
November 26th, 2011, 4:58 pm
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

<t>Ok on plotting, I think this might be ok and could be cointegrated. Try having a look at the spread of log prices though and fitting an model with trend. There are different statistics for adf with trend. If the trend is fairly constant then you can maybe play the spread around the trend. Don't t...
by blade
November 26th, 2011, 10:53 am
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

<t>This series is more liquid so a better candidate. Both stocks rise and then drop, so you may be getting a false positive like I stated on my previous post due to this, but they do peak at similar times, so it's possible cointegration exists. Again I've not done the analysis or plotted, just looki...
by blade
November 25th, 2011, 4:56 pm
Forum: Student Forum
Topic: Algo trading: General question
Replies: 3
Views: 15733

Algo trading: General question

<r>I'd also recommend this ...<AMAZON id="0814407242" tld="uk" url="http://www.amazon.co.uk/Optimal-Trading-Strategies-Quantitative-Approaches/dp/0814407242and"><URL url="http://www.amazon.co.uk/Optimal-Trading-Strategies-Quantitative-Approaches/dp/0814407242and"><LINK_TEXT text="http://www.amazon.c...
by blade
November 25th, 2011, 4:41 pm
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

<t>Ok not plotted this, but if column 2 is the 2nd stock price, then it looks like you are looking at one illiquid name (stock 2) vs a liquid one (stock 1). Alot of the values in the 2nd row look repeated over many days so it looks like it trades only so often and you are just interpolating forward ...
by blade
November 24th, 2011, 4:18 pm
Forum: Trading Forum
Topic: cointegration based pair trading
Replies: 28
Views: 24255

cointegration based pair trading

<t>Ok, can I ask one thing ? Have you checked that the stock prices are actually I(1) before doing the cointegration ? ie are you unable to reject a unit root in the individual prices ? I find it strange that you are able to reject a unit root on the pair with so few crosses of the mean. I guess on ...
by blade
November 24th, 2011, 4:04 pm
Forum: Trading Forum
Topic: Looking for ideas to identify a certain pattern
Replies: 7
Views: 17427

Looking for ideas to identify a certain pattern

<t>Looks to me that you want to identify a break in regime ? Have you looked at statistical process techniques such as CUSUM techniques ? Before you bombard me with questions, I looked at this before and did some work on it, but am not an expert. I was looking at it to try and catch when equity pair...
by blade
November 4th, 2011, 9:42 am
Forum: Trading Forum
Topic: Algorithmic Market Making
Replies: 9
Views: 19496

Algorithmic Market Making

<t>Here's my 2 ideas, but bear in mind this is all speculation and not based on actually having done this. 1) Ok, the simple method may be something like using synchronized quotes at various time scales. Eg daily. to fit a relationship between oil price and sp500. Also there's been alot of work done...
by blade
November 4th, 2011, 9:29 am
Forum: Student Forum
Topic: Cointegration, Timescales, Etc
Replies: 2
Views: 16371

Cointegration, Timescales, Etc

<t>Ok, cointegration is used to take 2 non-stationary processes and by some special combination make them into a stationary process. I(1) to I(0). So first things first check that both series are I(1), ie have a unit root and you can't reject the unit root on the individual series. I suspect that on...
by blade
June 10th, 2011, 8:38 am
Forum: Numerical Methods Forum
Topic: How do you test for unit root in an ARMA model?
Replies: 7
Views: 22786

How do you test for unit root in an ARMA model?

<r>Ok, now I am confused. I was going to answer your questions but I think we will just end up going back and forth and you will be more confused. Are you learning or have you learnt time series ? Because some of this stuff is pretty fundamental. Think if you are struggling with this sort of stuff m...
by blade
June 7th, 2011, 1:05 pm
Forum: Trading Forum
Topic: Buying algorithms
Replies: 6
Views: 20306

Buying algorithms

You looked at software vendors such as Flextrade, Portware etc ? They allow you to write customized strategies fairly easily, well as easily as you can do these things.
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