I do a simple example with the follow three series(stocks prices):
a = 1, 1.2, 1.8, 1.3, 0.9, 2 b = 56, 58, 63, 61.5, 57.6, 58 c = 105.6, 110, 106.9, 103, 101.2, 107
ok, so let assume those series are the prices of the three stocks, named A, B and C.
Now, I do the linear regression doing:
mod = lm(a ~ b + c + 0)
the result of the linear model is:
Call: lm(formula = a ~ b + c + 0) Coefficients: b c 0.030570 -0.004095 > mod$residuals 1 2 3 4 5 6 -0.2795238 -0.1226474 0.3118110 -0.1583030 -0.4464512 0.6650691
Now we know the coefficients of b and c and here I have a doubt regarding, how can I understand reading these coefficients the weight of the stocks I need to buy.
With the weight I mean, example:
A: 10 stocks B: 2 stocks C: 16 stocks
I would like to create this spread and calculate the correct number of stocks.
IMPORTANT: This is only an example, I know that I need more tests to check the stability etc etc but with this example I only would like to understand:
How can I calculate the number of the stocks reading the linear regression coefficients?