Statistical Pairs
Trade

Trade the spread between two correlated instruments. When correlation breaks, the spread is expected to revert, go long the underperformer, short the outperformer.

QuantitativeDaily1.5:1 R:RConservative
Deploy This Strategy See Rules

Rules & Configuration

The full rule set, required indicators, suggested configuration, execution flow, and performance parameters for the Statistical Pairs Trade setup.

Trade the spread between two correlated instruments. When correlation breaks, the spread is expected to revert, go long the underperformer, short the outperformer.

Indicators Used
Correlation (90d)Spread Z-ScoreCointegration Test
Rules
📈 Pairs Entry
  • Select two instruments with correlation > 0.80
  • Confirm cointegration (Engle-Granger or Johansen test)
  • Calculate spread Z-Score
  • When Z-Score > 2.0: Short the outperformer, Long the underperformer
  • When Z-Score < -2.0: Reverse the positions
  • Exit when Z-Score returns to 0
💡 Pro Tip

Classic pairs: XAU/XAG, CL/BZ, ES/NQ, AAPL/MSFT. Always verify cointegration before trading. Correlation alone is insufficient.

Common questions

What is the Statistical Pairs Trade strategy?

Trade the spread between two correlated instruments. When correlation breaks, the spread is expected to revert, go long the underperformer, short the outperformer.

What's the pro tip for trading Statistical Pairs Trade?

Classic pairs: XAU/XAG, CL/BZ, ES/NQ, AAPL/MSFT. Always verify cointegration before trading. Correlation alone is insufficient.

What indicators does the Statistical Pairs Trade strategy use?

The Statistical Pairs Trade strategy uses the following indicators: Correlation (90d), Spread Z-Score, Cointegration Test. These can be configured directly in AlgoBars AlgoBuilder.

What timeframe works best for Statistical Pairs Trade?

The Statistical Pairs Trade strategy is best traded on the Daily timeframe. This can be adjusted based on your trading style and market conditions.

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