Pair Trading > Models, Algorithms & Approaches

Some questions on the statistics

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Max Mayhew:
Legend!

Last question (I hope, sorry), if using 100% margin, how are the pair trade sizes calculated in a portfolio. I have calculated a portfolio of 3 pairs, one of those pairs is using 9k (of 100k) per trade, another pair is using 36k, what would be the rationale behind this?

Thanks

admin:
Hello!

Margin allocation is explained here: https://wiki.pairtradinglab.com/wiki/Pair_Trading_Lab_Portfolios

If you think your portfolio is not set up correctly, please create a ticket in Helpdesk, describing the problem in detail (including the portfolio name), we will take a look!
Thanks!
Karel

Max Mayhew:
Hi thank you
I have opened a ticket!

Max

Max Mayhew:
Hi,

Quick question on the EOD and intraday:

You said "stats (moving average, std dev) are determined using EOD close prices; signals to enter/exit are determined using real-time bid/ask prices (intraday)".

Am I understanding that you use EOD to calculate things such as Z score etc, if a price at the EOD moves the Z score above an entry threshold, will your backtests enter the moment the market opens? If price has moved to a point where entry threshold is breached but the market is now closed because it is the EOD, when will it then trigger this trade?

Thank you!

admin:
Hi,

for instance the Ratio model:

* the moving average and standard deviation is calculated each day based on EOD prices
* then the immediate Z-Score is calculated using the precomputed moving average, standard deviation AND real-time bid/ask prices

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