Statistical Arbitrage for the Uninitiated (no fluff)
Video Overview & Insights
Since our last discussion, a number of Wizards have asked for an introduction to Statistical Arbitrage and what all the metrics on the Crypto Wizards platform even mean. In this video we answer pretty much all of it in a one-stop-shop style video to cover everything as quick as possible.
For the first 2 minutes you are speaking about an option’s delta in classical finance. Another thing any trader should know is that correlation based arbitrage is a stochastic relationship, the most well known example of this is a stock’s beta. The randomness the actual correlation experiences is fat tailed meaning incredibly scale invariant and in some cases doesn’t have mean or variance (these are low value tail exponents in statistical consequences of fat tails). The takeaway is that without defined risk strategies you can lose more money in a day making these forms of bets than you make over the lifetime of success using them. I don’t mean that this is useless information but any trader or individual interested in trading should know the risk. Renaissance Technologies (Jim Simon’s’ hedge fund) used a similar method relying on hidden Markov models to find statistical correlation and came very close to closing down in extreme market environments. That is to show it is not impossible to be successful making trades like this but risk management is still very important.
Topics covered:
1) What is pairs trading and statistical arbitrage
What software are you using?
2) Static, Dynamic and OU spread intro
3) Half Life and Hurst Exponent
W vid
4) ECM and Impulse Response
5) Dependency with Copulas
I mean this is a Gem but it seems to miss some concepts. I’m kinda just refreshing my knowledge base on the topic and it’s 80 percent.
6) Backtesting
7) Risk Management
You're just creating a synthetic and are long or short someting, just at double the fees and spreads.
...and more
website: https://cryptowizards.net
Is the hedge ratio basically a beta then
new Udemy course: https://www.udemy.com/course/master-financial-econometrics-for-time-series-analysis/?couponCode=39109064C8AE8628812E
#statisticalarbitrage #crypto #trading #tradingstrategy #arbitrage
It’s cool. Lacks a real-life scenario though
More User Perspectives
Wtf just discovered this gem of a channel!! Finally a crypto trading channel with actual math, using copulas and stochastic methods is really fascinating. Will dive deeper in your channel
@robertog7362Do you have a discord? How can I access your platform for stat arb?
@mjafar96Which will be best prop firm for stat arb strategy
@tommyshelby7502what is that dashboard platform you're using ??
@pulinduthewmika1137can we do this without shorting the other asset?
@ibraheemali9541Very smart
@vidaamericana_brHow many trials were attempted for your backtesting? This can produce false positives. Bias is also possible depending on how you created your test and what data you used.
@pappaflammyboi5799Are the backtest percentage results per day, week, month, or year? What's a range of yields of live results (not backtests)? Thank you.
@quartamileWhat exchange would you recommend for stat arb and is it bad to trade with leverage even when you got an edge (which we should have wit stat arb, right?)?
@superpasi7What about fees? Do you compound your returns or cash per trade?
@PriceisriceMan did everything he can and still gonna make it much more better
That's my mentor Shaun for you guyss
Great video as always, thanks for pulling it together. I am trying to learn some much about how to get triggers from Copula and or OU values and how I can use them to place trades on Binance or similar exchanges. I was going to try and wire a python program with API's calls into Binace, similar to what you have written on previous course, but not sure what values to look for or where to get triggers from the CW Zscopre app. Is this something you will be covering in future videos or can you point me in the right direction for getting Cop and OU values like you did with Zscore over the last few years. Sorry for the clumsily written comment but not sure how best to proceed. BTW Love the look and feel of the new Zscore app :)
@JonUK-iz5fcI'm trying with GRM portfolio model and using hippo-kan for intraday entry
@hackerborabora7212Excellent video! I bought your course about AI and crypto, what a course! It gave me more money than I had with 3 years of crypto.
@cauedagostinho4427Just explain us how to make money we are not as experts as u
@midoucoco8402That was a great presentation. I think the only thing missing is a part where you are very straightforward: "Here is EXACTLY how my platform crypto wizards can help you make money" and literally just give clear and real life examples how one could utilize each indicator(and all combined) to get them closer to a profitable trade. You'd be surprised how many more people you'd be able to convert into customers if you just tell them directly why they should bother having a look at your platform.
@smnomad9276