Intermarket spread ratio

[sprd4alpha]

Hi guys,

Got a question on spreading intermarket. Did you guys notice Thursday's breakdown in correlation after 3 mo LTRO ECB announcements? 6E (eur/usd) traded up and ES (sp500) traded down, massively. I haven't seen it break down like this for a while.

Now my question: Co-Integration tick size adjusted co-integration seems to be the best quant way to grab the ratios. However, this takes time and intra day this is to slow. I have used ATR on occasion to compute quick and dirty spreads, but never inter market. Any ideas on how to compute a quick and dirty ratio for 6E over ES, tick size is : 0.25 and .0001. I am curious how you guys are doing it. Hope to hear from you, thanks.

 

[Martinghoul]

I'd go for linear regression, if I were you... In the spirit of keeping it simple and all that.

 

[sprd4alpha]

Regression must show completely insiginifcant constant to be cointegrated, the regression becomes just as cumbersome as doing a cointegration study in that respect. I do agree that regression can be used to find that linear combination that generates a stationary series, thought it is not as easy as it seems...usually tick data will arrive in uneven intervals between the 2 series and then adjusting for tick size etc...


I was hoping a trader would post in here with a quick and dirty way to pump out these ratios intra day in an instant. So, does anyone have the secret sauce ?

 

[Martinghoul]

Best of luck to you with this...