Author Topic: Pair Database - Blute Force combinations  (Read 424 times)

tcima

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Pair Database - Blute Force combinations
« on: October 11, 2021, 06:54:50 am »
Hello,

I started using the Pair Database a few days ago and am wondering why the database employs blute-force combinations instead of sector-based ones.
I wonder if matching sectors does not matter much.

tcima
« Last Edit: October 12, 2021, 04:04:58 am by tcima »

admin

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Re: Pair Database - Blute Force combinations
« Reply #1 on: October 13, 2021, 05:36:29 am »
Hello,

this is a very good question. Our previous version of pair database (before 2015) was actually sector-based (600k pairs). The problem was there were some very good pairs out there which were not in the database, because each equity was from a different sector. There was still a strong fundamental relationship between both firms, but not covered with sectors.
So in order to cover pairs like this we decided to brute force the whole equity space in the current version of the database.

We are aware this is not ideal from other perspectives (a lot of spurious correlation / cointegration is one example).  We are open to suggestions here.

Kind regards,
Karel

tcima

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Re: Pair Database - Blute Force combinations
« Reply #2 on: October 13, 2021, 06:40:12 pm »
Hello Karel,

Thank you for your comment.

> There was still a strong fundamental relationship between both firms, but not covered with sectors.

I have come to think so after repeating searching the database and analyzing various kinds of pairs.
I understood.

BTW, I happened to find you site recently and now think that I should have found it much earlier.
I'm so impressed with ingenious and elegant design of your site.

tcima