The Augmented Dickey-Fuller Test can be used to measure how well ranked certain pairs are against others for co-integration. So then say we have a known co-integration between ...
Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model: ...
I have some closing price data for two Australian banks which track each other very closely. http://dl.dropbox.com/u/12337149/stat/CBA.csv http://dl.dropbox.com/u/12337149/stat/WBC.csv Code from ...
I ran a Johansen cointegration test on 3 instruments, A B and C. The results that I got are: R<=x | Test Stat | 90% | 95% | 99% r=0 --> 36.7 | 18.9 | 21.1 | 25.8 r=1 --> ...
In what ways (and under what circumstances) are correlation and cointegration related, if at all? One difference is that one usually thinks of correlation in terms of returns and cointegration in ...
I did cointegration test on two identical time series, and the result shows that they are not cointegrated, but intuitively, I think they are. Can anyone share some thoughts on this? Thanks!
What is the intuition behind cointegration? What does the Dickey-Fuller test do to test for it? Ideally, a non-technical explanation would be appreciated. Say you need to explain it to an investor ...