Pair Trading > Models, Algorithms & Approaches

Do you also feel that the Residual Model performs poorly?

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JackBeach:
Hi all,

I've been playing with paper trading and 50 pairs for the past couple of months while mixing models (Ratio, Residual, Kalman Grid v2 and Kalman Auto).

And I feel like the Residual model performs poorly compared to Ratio and Kalman.

Does anyone share the same feeling?

Lee Umberleigh:
Hi Jack,

Have you tried using the Johansen Test to model multiple pairs instead of just 2 pair? I'm wondering if this might strengthen the cointegration force that pulls the spread back towards the zero line.

Lee

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