Unilateral Pairs Trading

This tool is currently under development. It is based on the concept of Unilateral Pairs Trading described in James Altucher's Book "Trade Like Hedge Fund".

Put simply, the concept is to trade the most volatile side of a closely correlated pair of securities when the difference between the the two securities exceeds two standard deviations from their historical relationship. For example, trade QQQQ against SPY.

If the more volatile security exceeds the spread, then the security is shorted on the basis that it is overpriced and the spread will narrow. If the more volatile security is trading below the spread then the security is bought in the expectation that it is underpriced and will rise.

A position is closed when the security reverts to within 0.5 standard deviations of the historical relationship. The trading rules are given here.

The tool currently only uses ETF's but its scope may be expanded in the future.

The last row in the output result set will tell you if you should open or close a position as of today's date.

It is intended to enhance the tool to allow you to specify securities pairs that you wish to follow and send alerts when a signal is issued.

Choose the ETF you will trade
(eg. QQQQ)
Choose the comparison ETF
(eg. SPY)

Backtest Start Date*
(eg. 01/01/1999)

Backtest End Date
Starting Capital
Trading Style
Short & Long Long Only Short Only
*The tool requires at least 40 days of trading history to compute the preliminary calculations.