KN

StatArb Edge #83

backtest


Strategy Description:

StatArb Edge is a systematic statistical arbitrage strategy designed to identify and capitalize on mean-reverting relationships between correlated assets. Leveraging cointegration analysis, dynamic hedge ratio adjustments, and real-time spread monitoring, the strategy continuously adapts to evolving market conditions. The model employs a rolling ordinary least squares (OLS) regression to estimate the optimal hedge ratio, ensuring that the spread reflects a stable statistical relationship. Using adaptive z-score thresholds, the algorithm dynamically determines entry and exit points, allowing for flexible risk management in different market environments. Key Features: ✔ Cointegration-Based Pair Selection – Ensures a statistically robust trading relationship. ✔ Dynamic Hedge Ratio Calibration – Adjusts for changes in asset behavior. ✔ Real-Time Spread & Z-Score Monitoring – Enhances trade timing and accuracy. ✔ Risk Management with Stop-Loss & Trailing Stop – Maintains disciplined trade exits. StatArb Edge provides a quantitative and structured approach to market-neutral trading. It is a refined version of the award-winning strategy that won Champion on Best Return Award and 1st Runner-Up on Best Strategy Design Award (Algo Challenge Association, Mar 2024), making it a tested and market-proven solution for systematic trading.

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