pairs trading
We ran the same pairs trading strategy on 11 exchanges and tested it over 20 years (2005-2024). Every single exchange underperformed its local benchmark. That was expected. What wasn't expected was how different the results are across markets, and what those differences reveal about market structure. Contents 1.
pairs trading
Of every exchange tested in this study, Japan stayed invested the most. Only one cash year in twenty. The US had six. Germany had fourteen. The UK had thirteen. Japan's pairs kept forming, year after year, through the financial crisis, through Abenomics, through COVID. Contents 1. Method 2.
pairs trading
Twenty years, -0.50% CAGR, Sharpe of -0.81. That's the headline. The pairs trading strategy we covered in the first post in this series, correlation-based, same-sector, z-score entry, ran clean over 2005 through 2024 on US stocks. It didn't blow up. It also didn'
pairs trading
We tested active z-score pairs trading on 7 major exchanges from 2005 to 2024. Convergence rates ranged from 77% to 87%. Every exchange lost money. Canada lost the most (-2.84% CAGR). Taiwan came closest to flat (-0.09% CAGR). The underlying cause is the same everywhere: transaction costs absorb
pairs trading
We ran an active z-score pairs trading backtest on US large caps from 2005 to 2024. 134 trades per year. 86.6% of spreads converged back to the mean. The strategy returned -1.22% CAGR over 20 years, vs 9.81% for the S&P 500. Contents 1. Method
pairs trading
The standard critique of pairs trading backtests is that they test on one market (usually US), cherry-pick parameters, and declare victory. We took the opposite approach: same parameters, same code, 12 exchanges, 2005-2024. Contents 1. Method 2. Global Results 3. The Charts 4. Key Findings 5. Excluded Exchanges 6. Short-Selling
pairs trading
We ran the same pairs trading strategy on 12 exchanges from 2005 to 2024. Every single market generated near-zero or negative nominal returns. One exception stands out: Japan. Contents 1. Method 2. Japan Results (2005-2024) 3. The Charts 4. Why Japan Works Better 5. The Benchmark Comparison 6. Limitations 7.
pairs trading
Most trading strategies bet on direction. Bull or bear, up or down. Pairs trading takes a different approach. It bets that two related stocks will snap back together after temporarily diverging. The market can go anywhere. What matters is the relationship between two specific stocks. Contents 1. Method 2. What
pairs trading
We screened 3,701 US large-cap stocks down to 2,579 highly correlated candidate pairs. Then we ran statistical cointegration tests on all of them. Only 516 passed (20.0%). Here's what that means, why it matters, and what the 80% failure rate tells you about pairs trading
pairs trading
Finding Pairs Trading Candidates: What 884,000 Correlation Tests Reveal There are roughly 3,700 US stocks with market cap above $1 billion. That's about 6.8 million possible pairs. Most have no useful relationship. Contents 1. The Screening Pipeline 2. Step 1: Define the Universe 3. Step