Professional Documents
Culture Documents
Shah 9/28/10
Conclusion: Spread returns were identified as invariants while trading Stock Pairs. The trading pairs
selected based on PCA analysis and the Half Life indicators were reasonably accurate indicators while
unwinding trades. The strategy performed better than Naïve Buy/Hold, but could be better optimized for
VaR management by incorporating a Utility function. A Factors-on-demand approach could be applied to
make the strategy more dynamic and adaptive to changes with time and easily broaden stock universe.