tag:blogger.com,1999:blog-4308716299514244953.post5413911492576107306..comments2017-05-27T10:41:26.253-04:00Comments on Market Rewind: Trading Energy Complex PairsJeff Pietsch CFAhttp://www.blogger.com/profile/08269888170503481402noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-4308716299514244953.post-11313719086695752242010-04-22T09:15:25.296-04:002010-04-22T09:15:25.296-04:00I have a couple of questions re your Pairs functio...I have a couple of questions re your Pairs functionality.<br /><br />1) You show correlation (Chart B) but the trading rules only seem to take into account z-scores. Is my observation correct? I ask as one frequently seen pairs trading model<br />enters a trade when the z-score is at an extreme AND the correlation is above some level. If it's not used as part of system entry/exit is its primary purpose for visual inspection of the series?<br /><br />2) Chart B is labeled as Rolling Correlation of Log Changes. Is each point in this chart:<br />a) The correlation coeff of the last N (Lookback period) days, i.e. how correlated are the last N days<br />b) A moving average of length N (lookback period) where each point being averaged is the correlation from the beginning of the series to that point<br /><br />I ask these questions as I'm trying to increase my basic pairs trading knowledge and am reading everything I can find in that area.<br /><br />Regards,<br />RobertRoberthttp://www.blogger.com/profile/14197672671873985421noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-44491301090635985802010-04-07T13:29:02.721-04:002010-04-07T13:29:02.721-04:00In this example I used Excel's natural log =ln...In this example I used Excel's natural log =ln() function. Best, Jjgpietschhttp://www.blogger.com/profile/16533041499456733660noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-58671500845558597322010-04-07T13:25:55.143-04:002010-04-07T13:25:55.143-04:00Regarding taking the Log of the difference. What b...Regarding taking the Log of the difference. What base are you using for the Log? I assume 10 ... correct?Roberthttp://www.blogger.com/profile/14197672671873985421noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-54914741784435640822009-09-26T21:00:01.869-04:002009-09-26T21:00:01.869-04:00Thanks Boris, it is important that the calculation...Thanks Boris, it is important that the calculation be symmetric to produce the same results whether you divide A by B or B by A. Price disparities can otherwise cause asymmetric results. Best, Jeffjgpietschhttp://www.blogger.com/profile/16533041499456733660noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-72113279518743456162009-09-26T20:41:15.668-04:002009-09-26T20:41:15.668-04:00Very nice article Jeff.
I don't understand yo...Very nice article Jeff.<br /><br />I don't understand you are taking the Log of the (A/B). <br /><br />Is there a reason why you are not using (A/B) directly?<br /><br />Thanks!<br /><br />BorisAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-34872986028962186732009-09-23T00:34:24.248-04:002009-09-23T00:34:24.248-04:00Interesting post. Very informative and well writte...Interesting post. Very informative and well written. I can use this as a guide as a trader. Thanks for sharing.stock markethttp://stockmarkettrading.com.au/noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-5198705984600779702009-03-20T17:13:00.000-04:002009-03-20T17:13:00.000-04:00www.etfrewind.blogspot.comwww.etfrewind.blogspot.comJeff Pietsch CFA Esqhttp://www.blogger.com/profile/08269888170503481402noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-54176762515775333862009-03-20T17:11:00.000-04:002009-03-20T17:11:00.000-04:00NOTE TO MARKET REWIND READERS, THIS SPREASHEET IS ...NOTE TO MARKET REWIND READERS, THIS SPREASHEET IS NOW BUILT INTO ETF REWIND!Jeff Pietsch CFA Esqhttp://www.blogger.com/profile/08269888170503481402noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-47923552189743398832008-08-08T14:53:00.000-04:002008-08-08T14:53:00.000-04:00Hi Eric, thanks for your comments. I like to see ...Hi Eric, thanks for your comments. I like to see a consistent ratio form and do use true range-type stops on my personal trades. Obviously there is more than one way to skin a cat; thanks for furthering the discussion!Jeff Pietsch CFA, Esqhttp://www.blogger.com/profile/08269888170503481402noreply@blogger.comtag:blogger.com,1999:blog-4308716299514244953.post-42155230600099452972008-08-08T12:29:00.000-04:002008-08-08T12:29:00.000-04:00Jeff- I came across your blog through Brett's ...Jeff- I came across your blog through Brett's blog entry on Pairs Trading. I trade commodities- both outrights & but have been focusing on spreads a lot more lately.<BR/><BR/>I had a couple of comments & questions.<BR/><BR/>1) Why are you dividing A / B? Most things I have done have just been subtracting A from B (after converting from point values to $ values for commodities with different $ point values) as thats the way the spread would be affecting your account balance.<BR/><BR/>2) I use tight stops with spreads as a mean-reversion entry seems to either work, or doesn't very quickly. Are you not using any stops?<BR/><BR/>3) Recently I have had a fair number of spreads go from the low (-2.2) to the high (+2.2), so you may be able to ride these trades longer.<BR/><BR/>4) This type of system would probably be uncorrelated to other systems people are trading, so there may be some additional positive impact from combining this method with other ones.<BR/><BR/>Great post. I look forward to reading others. <BR/><BR/>Regards,<BR/>EricEricd922http://openid.aol.com/Ericd922noreply@blogger.com