I was going through the paper of Avellaneda (2008) on stat arb and I found it interesting that he uses asset returns vs. their respective ETFs to compute the s-score.
I am wondering if anyone has tried this approach to pairs trading. How does it compare to Johansen's method, where the actual price series is used?
I can't imagine this approach being stable if trying to trade intraday, due to all these return computations.
I haven't tried either method so I would appreciate some feedback on your experience.