theorangedog.net

Tag: Pairs Trading

Basic Dickey Fuller Test

by theorangedog on Nov.02, 2007, under Skills

See the attached document for an example of how to perform a Dickey Fuller test for cointegration, along with an excerpt of the distinct t-table.

Dickey Fuller example

This example determines if a single data set is cointegrated. Replacing this series with the desired measure of spread between two series, or another metric such as the log ratio of two series, may be done as a method for identifying pairs trading candidates.

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