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Learn Algorithmic Trading
book

Learn Algorithmic Trading

by Sebastien Donadio, Sourav Ghosh
November 2019
Beginner content levelBeginner
394 pages
10h 31m
English
Packt Publishing
Content preview from Learn Algorithmic Trading

Adjusting portfolio composition and relationships

Another important factor to build StatArb strategies that perform well consistently is understanding and building systems to adapt to changing portfolio compositions and relationships between different trading instruments. The drawback of having the StatArb trading strategy depend primarily on the short-term relationships between large number of trading instruments is that it is hard to understand and adapt to changing relationships between price moves in all the different instruments that constitute a portfolio. The portfolio weights themselves change over time. Principal component analysis, a statistical tool from dimensionality reduction techniques, can be used to construct, adapt, and ...

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Publisher Resources

ISBN: 9781789348347Supplemental Content