Let's say I have 2 time-series, how would I "standard beta hedge" them against each other? For example, what if the position in 1 timeseries is 100 shares at 16 USD per share. Another time-series is 25 USD per share. Covariance of the two is 50 and the standard deviation of time-series 1 is 5 and of time-series 2 is 7. So I know that:
beta = Cov(ts_1, ts_2)/(SD(ts_1)*SD(ts_2)) beta = 50/(7*5) beta = 1.428
How would I determine the position of ts_2 that I should short?