Trading strategy with two-stage correlation and co-integration
I implement and expand upon a high frequency and dynamic pairs trading strategy; using a market-neutral statistical arbitrage which employs two-stage correlation and cointegration. The strategy is based on George J. Miao’s work, High Frequency and Dynamic Pairs Trading (2014). The sample data has been selected from the financial sector for the month of February 2018 at the interval of 1 minute. The optimal strategy yields a return of 2.9% vs -3.8% from S&P 500 for the given time frame.