Statistical Arbitrage Strategies¶
Market-neutral strategies exploiting price relationships.
Overview¶
Statistical arbitrage (stat arb) strategies exploit temporary mispricings between related securities, typically maintaining market neutrality.
Strategies in This Section¶
| Strategy | Description | Complexity |
|---|---|---|
| Pairs Trading | Trade related stock pairs | Intermediate |
| Sector Neutral | Neutral within sectors | Intermediate |
| Beta Neutral | Market-neutral construction | Advanced |
Quick Example¶
Text Only
signal pairs:
// Trade spread between related stocks
spread = prices[A] - beta * prices[B]
zscore = (spread - rolling_mean(spread, 60)) / rolling_std(spread, 60)
// Revert spread extremes
emit -zscore
portfolio main:
weights = pairs.long_short()
constraints:
net_exposure = 0.0 // Market neutral
backtest from 2015-01-01 to 2024-12-31
Key Characteristics¶
- Market neutral: Long and short positions offset
- Low correlation: Returns independent of market direction
- Higher turnover: Active trading to capture small mispricings
- Capacity constrained: Limited by liquidity
Expected Performance¶
| Metric | Typical Range |
|---|---|
| Sharpe | 0.8 - 1.5 |
| Annual Return | 4% - 10% |
| Max Drawdown | 5% - 15% |
| Market Beta | -0.1 to 0.1 |