Pair Trading Lab Helpdesk & Forum

Pair Trading => Other => Topic started by: Daniel Stern on September 19, 2013, 02:31:35 pm

Title: Score
Post by: Daniel Stern on September 19, 2013, 02:31:35 pm

What does score mean?

Thank you

Title: Re: Score
Post by: admin on September 20, 2013, 09:48:37 am

Hello,

score is an old, proprietary metrics to evaluate how good the equity of the pair is. It is calculated like this for a single backtest:

Score = MAPY/MaxDD

Where MAPY is another metrics - Median Annual Percentage Yield.

MAPY is calculated like this:

• split the backtest to year periods
• evaluate CAGR for each period
• take the median of the CAGR list - this is the MAPY

For the study, average value of Score is calculated.

This metrics is already deprecated, we will replace it by something better based on CAGR and equity linearity. It means - it will not be used and displayed for long.

For evaluating quality of pairs, we recommend to use CAGR and Equity Linearity. Personally, I search for pairs having CAGR>20 and equity as linear as possible.