Statistical Arbitrage

This e-learning workshop introduces delegates to statistical arbitrage strategies, including pairs trading, with particular reference to research, testing and implementation. Relevant software (MATLAB) will be used throughout the workshop to illustrate examples and to help students practice the essential steps in developing a stat arb strategy.

Our e-learning workshop is designed to give you everything you need to get started and includes:

  • Online course module (3 months access)
  • Hard copy manual
  • MATLAB software with MATLAB tutorial
  • Direct access to trainer for assistance

This course will be conducted using MATLAB. All delegates will receive a pre-recorded 3 hour MATLAB tutorial.

Frequently Asked Questions

Duration:

6 Hours (plus 3 hour software tutorial)

Trainer:

Ernest Chan

Course Fee:

£895 + VAT

Register

Overview of statistical arbitrage 

  • The different types of statistical arbitrage strategies
  • Stationarity, cointegration, mean reversion, and momentum

The Essentials of MATLAB

  • The pros and cons of using MATLAB
  • Quick survey of syntax
  • Exercises: building some useful utilities for trading research

Directional trading

  • Concept of stationarity and why it is useful
  • Statistical test for stationarity: adf
  • Exercise: Testing for stationarity
  • Testing for mean-reversion: computing half-life based on Ornstein-Uhlenbeck formula
  • Why is computing half-life better than computing average holding period?
  • Exercise: Computing the half-life of mean-reversion
  • Exercise: Backtesting a Bollinger Band strategy for AUDCAD and EURCHF

Pairs and triplets trading

  • Concept of cointegration and why it is useful
  • How is cointegration different from correlation?
  • Statistical tests for cointegration: cadf and Johansen
  • Exercise: Find out if GLD-GDX is cointegrating
  • Finding the best hedge ratio
  • Exercise: Backtesting a Bollinger Band pairs strategy
  • Trading cointegrated triplets
  • Exercise: Backtesting a Bollinger Band triplet strategy
  • What are the best markets to pairs trade?

Index arbitrage

  • Trading an ETF against a basket of its component stocks
  • Two ways of constructing a basket
  • Exercise: Backtesting an index arbitrage trading model

Long-short portfolio

  • Ranking stocks in an index based on various simple returns criteria
  • How minor variations in strategies can produce big differences in returns
  • Important biases and pitfalls in backtesting long-short portfolio strategies
  • Exercise: Backtesting variations of a long-short portfolio strategy

WHAT IS THE TIMELINE FOR THE COURSE?
You can start the course anytime you wish and will gain access to the online course materials within one business day of registration. Your online access will last for 3 months, plus you will also receive a hard copy of the manual within a few days of registration.

HOW LONG SHOULD IT TAKE ME TO COMPLETE THE COURSE?
We provide three months’ access to the online material (one month to Matlab) to give students a chance to take things at their own pace, but we expect most people to take no longer than a week to complete the course.

WHAT KIND OF MATLAB ASSISTANCE AM I PROVIDED WITH?
There is a 3-hour MATLAB tutorial included with the workshop. If you have used MATLAB before, you should find it quite easy to complete the exercises, which do not require extensive programming. No prior knowledge of MATLAB is in fact necessary, although some general experience in programming using other simple languages would be useful.

WHEN WILL MY MATLAB LICENCE BEGIN?
You are advised to go through the online material first, then let us know when you are ready to start the course in conjuntion with the MATLAB exercises, at which point we will request that your MATLAB licence begin. Please bear in mind it may take a couple of days to set you up with MATLAB.

IS THE COURSE STILL USEFUL IF I HAVE NO INTENTION OF USING MATLAB?
Yes, the main aim of the course is to communicate the principles of artificial intelligence. Furthermore, MATLAB programming code can be adapted fairly easily into ‘R’, an open-source alternative.

WHAT DOES THE ONLINE COURSE MATERIAL COMPRISE?
The online course material is made up of two modules. The first module is the main course and consists of slides with the trainer’s narration, recorded demos, and exercises with answers. The second module consists of a tutorial covering the essentials of MATLAB programming.

WILL I BE ABLE TO ASK QUESTIONS AS I GO ALONG?
The trainer is happy to help you out in case you need assistance. Questions can be asked directly by email or through the trainer’s blog. However, the number and depth of the questions should be kept within reason and within the scope of the training course.