Hands-On Machine Learning for Algorithmic Trading

Performance comparison

To compare the performance of two return series, we model each group's Sharpe ratio separately and compute the effect size as the difference between the volatility-adjusted returns.

Visualizing the traces reveals granular performance insights into the distributions of each metric, as illustrated by the following chart:

Bayesian Linear Regression for Pairs Trading

In the last chapter, we introduced pairs trading as a popular algorithmic trading strategy that relies on the cointegration of two or more assets. Given such assets, we need to estimate the hedging ratio to decide on the relative magnitude of long and short ...