# Tagged Questions

Cointegration is often used in statistical abitrage as a way to identify how to combine some tradable instrument to obtain a *mean reverting* one.

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### how to mix trading signals for the same product?

I have multiple trading signals developed using cointegration on the same stock using various correlated assets. Is there a mathematical way to combine them to achieve better entry/exit points and ...
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### Cointegration for forex using ARMA model to forecast the spread

I am working on an automatized quantitative strategy that use cointegration in Forex. I am backtesting this strategy in Python. Please see below the python file: https://drive.google.com/file/d/...
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### cointegration strategy

If it can be proved that two time series $$S_t^1=\alpha + \beta S_t^2 + \xi_t$$ representing stocks are correlated, with $\beta=-2$ and then are proved to be cointegrated, how a portfolio should be ...
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### How to impose restriction on cointegrating vector in R, reproducible example

The code given below estimates a VEC model with 2 cointegrating vectors. It is a reproducible code, so just copy and paste into your R console (or script editor). ...
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### Johansen cointegration test interpretation in R

I want to test my time series for cointegration using the Johansen test in R. I got the following result and so I know now that at least 5 out of 9 of my time series are cointegrated. My question is, ...
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### Problem with overlapping data when testing futures market efficiency

In my case non-overlapping data would represent the scenario where futures prices (3 months) do not correspond to the futures spot prices in terms of delivery date. For example, futures settlement ...
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### Estimating Daily Dynamics using Hourly Data

This article gives a nice outline of how daily data can be used to estimate cointegration on a monthly horizon. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1404905 I'd like to use the same ...
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### Quantifing quality of cointegration

I'm trying to replicate instrument which is untradable. My approach is analysis of cointegration between it and three another time series (four variables in model) which correlates with it. I found ...
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### Assets cointegration: optimal inventory for futures market

I'm interested in HFT cointegration stratagies, and recently found interesting article "Algorithmic Trading of Co-Integrated Assets" The article describes mean-reversion strategy for N-assets. ...
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### Imposing Restrictions on Cointegrating Vectors, R example

The code given below estimates a VEC model with 4 cointegrating vectors. It is a reproducible code, so just copy and paste into your R console (or script editor). ...
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### Philips-Ouliaris test for cointegration

I'm trying to implement cointegration tests using the R urca package. I've figured out the Johansen test (ca.jo), but I'm having trouble with the Philips-Ouliaris test (ca.po). I have two questions: ...
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### Cointegration tests

I'm trying to figure out how to perform cointegration tests in R between 2 time series. I'm using po.test from the package ...
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### Using cointegration to prove that a long-short strategy is market neutral (in CAPM sense)

I am trying to prove that a long-short strategy invested according to the cointegrated relationship from Engle-Granger's. So essentially I'm trying to show that the return $r_{XY}$ of the portfolio (X ...
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### Modelling long run relationship between dividend and earnings

I am working on a paper where I have to model the long run relationship between earnings and dividends. I have downloaded the raw data from shillers website. I have converted the series to log(...
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### Stepwise Cointegration

This is more of a general question at this point, but if my thought process makes sense I will follow up with an R implementation. I have read a number of papers on cointegration analysis for pairs ...
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### Pairs trade CDS contracts using cointegration

Recently I have looked at some sovereign CDS spreads (of the Nordic countries to be precise) and have tested for cointegration in the levels (i.e. untransformed) and logs of the spreads. Tests ...
1answer
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### Alternative ways to understand time-varying comovement between two time-series?

I have been looking into ways to better understand how the dependencies/correlations/etc between two time series can vary over time. I first thought about using a Kalman/particle filter over a ...
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### Cointegration trading: Ignoring pairs that aren't economically related

Cointegration trading question What's the state of the art when it comes to choosing proper subsets of stocks/assets where cointegrating relationships aren't ignored as (likely to be) spurious? For ...
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### Meta-view of different time-series similarity measures?

While I spend most of my StackExchange time on MathematicaSE, I'm in the business and follow the questions and answers on this site with great interest. Recently questions like the following (and ...
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### How to interpret results of Johansen Test?

I have two time-series a & b. The objective is to find out whether two series are cointegrated or not. I am using Johansen Test in R to find this out. I am using urca package of R. Here is the ...
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### cointegration applied to Portfolio Construction & Risk management

There are all sorts of applications of cointegration to generating alpha on mean-reverting timeseries: comparing spot vs. futures, bond spreads, identifying mean-reverting residuals, etc. But there ...
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### Entry and exit points for very short mean-reverting timeseries

I have a model specifying a cointegration relationship on a number of transaction-level timeseries. I would like to specify entry and exit points for trades where these points ideally would be just ...
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### What are the applications of cointegration?

We have had several posts on cointegration, and I must admit that I have only seen them mentioned here and there but I have no real experience using this concept. My question is pretty simple: how do ...