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Hi Don: The following is a very standard approach. It's basically the use of Bollinger Bands on the log ratio of the two prices. So, say one stock is y and the other stock is x. Denote the prices as $P_y$ and $P_x$. Then, you do the following. 1) Keep calculating the moving average of $log(\frac{P_y}{P_x})$ over time along with the moving standard ...

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