Cointegration And Pairs Trading: Building Mean-Reversion Strategies That Survive

Keywords — Arbitrage opportunity, Pairs trading strategy, Basket trading Cointegration, Mean reversion, Cryptocurrency market. Paper type — Research paper. 2

Jun 29, 2026 Market-neutral strategy trading a mean-reverting spread. Identifies two historically cointegrated financial instruments (e.g stocks

Jul 30, 2019 mean-reversion pairs-trading strategy. We distinguish these two cointegration pairs-trading strategies had positive returns on average

the profitability of cointegration-based pairs trading strategies. Using S&P Pairs trading under a mean reversion model with regime switching

We'll cover key aspects like statistical arbitrage, cointegration, and optimal parameter estimation, providing a comprehensive overview for both seasoned

A pairs trading strategy is a mean reversion strategy on the spread, or price from the mean, this strategy predicts the spread of the cointegrated pair of

Jul 21, 2017 Statistical arbitrage is based on pairs trading of mean-reverting returns. We used cointegration approach and ECM-DCC-GARCH to construct 98

Backtesting the pairs trading strategy on every pair of cointegrated stocks within the S&P 500 index from 2007 to 2020 yielded an average return of nearly 250%

Jun 21, 2026 For each pair surviving the cointegration filter, we estimate the half-life of mean reversion. Implementation of Pairs Trading Strategies

Similarly, currency exchange rates that exhibit co-movement over extended periods, driven by analogous responses to key monetary policies such as inflation

Aug 26, 2015 Mean reversion: GGR interpret the pairs price time series as cointegrated in the sense of. Bossaerts (1988 However, Bossaerts develops a

From equation (1 the spread is stationary by definition and exhibits mean-reverting properties. We can use this to construct a quantitative trading strategy

This study observed that the pairs trading strategy had better returns with cointegrated pairs and contributed to the existing literature on the cointegration

Oct 13, 2021 Clegg et al. [9] use partial cointegration as a means of identifying pairs to develop the Pairs Trading strategy, using the components of the

Jan 23, 2023 That makes them good candidates for mean-reverting trading strategies based on statistical arbitrage (a.k.a. ”spread trading” or ”pairs trading

Jun 21, 2026 Pairs trading exploits the mean reversion of a coin- tegrated spread ing which a pair's cointegration breaks down and the strategy

cointegration and its significance in pairs trading strategies and establish a solid Pairs trading is a mean reversion strategy that aims to capitalize

Pair Formation (PF Identifying historically correlated pairs. • Trading Strategy (TS Executing trades based on mean-reversion of the spread. Its appeal

Next, we will briefly describe the models our pairs trading strategies build As a relative-value arbitrage strategy relies on mean-reverting patterns, we

Similar to the previous trading strategy, the main concern of the cointegration approach is the mean reversion of the spread. However, instead of defining