I'm trying to backtest Pairs Trading but have become a bit confused on the different methods of selecting pairs, how to look for trading signals and what size of the positions to take in the assets. ...
I have constructed a mean reverting spread using two indexes. I know they have to be mean reverting, but when plotted side by side they are mean reverting for a little bit and then deviate and head ...
Came across a method involving pairs in the book Hedge Fund Market Wizard: Given a Stock(or Collective of instruments)that follows closely to say Dow index with a beta<1(very short term) but ...