# Johansen Cointegration Test

I just performed a Johansen Co-integration test on two stocks.

The results I get are:

ans =

      r0       r1
t1    true     false


I am using Matlab. Can someone interpret these for me?

If I have understood the test properly, they are a good correlated pair. With Mean reversion.

Are they mean reverting?

Also, I have read about stationary pairs but the technical definition is a bit confusing. If possible can someone help point me in the direction to a simpler explanation? Or may be a book to start off?

Did the test again with the following result:

>> [h,pValue,stat,cValue,mles] = jcitest(Y)


Results Summary (Test 1)

Data: Y
Effective sample size: 229
Model: H1
Lags: 0
Statistic: trace
Significance level: 0.05

r  h  stat      cValue   pValue   eigVal
========================================
0  0  9.6981    15.4948  0.3467   0.0411
1  0  0.0979    3.8415   0.7872   0.0004


h =

      r0       r1
t1    false    false


pValue =

      r0         r1
t1    0.34672    0.78721


stat =

      r0        r1
t1    9.6981    0.097852


cValue =

      r0        r1
t1    15.495    3.8415


mles =

      r0              r1
t1    [1x1 struct]    [1x1 struct]


I am trying to understand whether h=0 implies no cointegration? What exactly does the pValue tell us?

In short still trying to understand how exactly to interpret the results.

I will get onto generating the eigenvalues. And trying to understand them after this part gets clear.

I don't have the advantage of attending school at the moment and understanding this is very difficult.