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 ...
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 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 ...
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!
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 --> ...
Below is a spread built with two ETFs that pass the cointegration test i.e. Adjusted Dickey Fuller, adfTest(type="nc") in R's fUnitRoots with a p-value < 0.01. The red line is the trendline. What ...
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 ...
When doing cointegration tests should I use the adjusted close price or just close price for the time series? The dividend of each stock is on different dates and can cause jumps in the data.