The Hedge Ratio: SLOPE, the Intercept by Hand and the Spread
This lesson is part of the course
In this lesson
You estimate how many units of Ostrand move with one unit of Halvery, write the intercept as ȳ − b·x̄, build the spread for all 120 days and chart it.
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Lessons in this course
- Two Price Series: Normalising, Log Returns and a Correlation Written OutFree
- The Hedge Ratio: SLOPE, the Intercept by Hand and the Spread Locked
- Is the Spread Mean-Reverting? A Regression Test Against a Fictional Table Locked
- Z-Score Signals: Rolling Mean and σ, Entry, Exit and Stop Levels Locked
- Half-Life of Mean Reversion: Sizing the Look-Back Window and the Holding Limit Locked
- Positions and P&L: A State Column, Units per Leg and the Daily Result Locked
- Costs and Capital: Trading Costs, Borrow Fees, Trade Count and Maximum Drawdown Locked
- Capstone: In-Sample vs Out-of-Sample, a Drifting Hedge Ratio and a Threshold Grid Locked