Recent content by RVLS

Stake size should be governed by the beta between the two indices. You can then slide this into your spread calculation Z = Y - βX where Z is the spread and β is the beta between the two symbols Y and X. The choice of beta calculation (fixed vs adaptive) generally depends on the volatility...

(Hope this thread is not completely dead) I trade pairs too. A stop gets blown away by this kind of takeover announcement. Only one method to reduce the hit - small position size in a portfolio of many holdings. No other way to handle company risk that I know of.

Hello Michael. Nice journal idea - I have been looking for threads on cointegration/hedging. Are you including fx and commissions in your returns data? Also, how are you modelling the cointegration?