Pair Trading - Exploring The Low Risk Statistical Arbitrage Trading Concepts

[VJAY]

Dear ncube,
can you please explain claculation using beta value...for eg
HINDZINC-NMDC pair...its beta showing 2.69...hindzinc lot size 3200,nmdc lot value 6000...here we short nmdc 1 lot then howmany qty hindzinc need to buy?
is it 6000*2.69=16140? 16140/3200=5.04....means for 1 lot short NMDC we need 5 lots of hindzinc?

 

[VJAY]

Hindzinc-nmdc/ p-value: 0.00707 / z-score: (-2.439)
apollotyre-ceatltd/ p-value: 0.364 / z-score: (-2.21))

 

[ncube]

Dear ncube,
can you please explain claculation using beta value...for eg
HINDZINC-NMDC pair...its beta showing 2.69...hindzinc lot size 3200,nmdc lot value 6000...here we short nmdc 1 lot then howmany qty hindzinc need to buy?
is it 6000*2.69=16140? 16140/3200=5.04....means for 1 lot short NMDC we need 5 lots of hindzinc?

Beta value formula is:
HINDZINC-price = beta * NMDC-price

If beta is 2.69 and NMDC-Lot size is 6000, then Hindzinc-qty should be (NMDC-LOT Size)/2.69 = 6000/2.69 = 2230 , i.e NMDC quantity is 2.69 times of HINDZINC.

If you are testing positional trades, then this need to be calculated every day and the buy quantity need to be adjusted accordingly.

 

[VJAY]

Dear ncube,
When running this cell am getting error.....

 

[ncube]

Dear ncube,
When running this cell am getting error.....

View attachment 28321

Have you added the function find_pair_coint() into the function area and run that cell?

 

[VJAY]

Have you added the function find_pair_coint() into the function area and run that cell?

Yes...

 

[ncube]

Yes...
View attachment 28322

The error says that the function is not defined...looks like you have not run the function cell properly. Try running all the cells again.

 

[VJAY]

The error says that the function is not defined...looks like you have not run the function cell properly. Try running all the cells again.

Done....but same error throws

 

[ncube]

Done....but same error throws

def statement should start from the leftmost point in the cell...check the screenshot I had shared in earlier post

 

[VJAY]

def statement should start from the leftmost point in the cell...check the screenshot I had shared in earlier post

Thanks ...its solved