Stat arb, synthetic asset and cointegration

Oliviertrader2020 · 2021-05-30T16:46:09+00:00

Hello, Is it possible to create a synthetic asset from the price of 2 assets? I explain: on Tradingview and other platforms, using the formula “3*ES – 1*NQ”, it is possible to create a synthetic asset (as on the screenshot) that will show us candles that represent the relationship of 3 ES contracts for 1 NQ contract. We can then make an stat arb when this synthetic asset, after having deviated too much from its mean (2 standard deviations), starts to come back to it. Thanks for your help. 🙂

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05/30/2021 at 5:46 PM #170813 quote

Oliviertrader2020
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Hello,

Is it possible to create a synthetic asset from the price of 2 assets?

I explain: on Tradingview and other platforms, using the formula “3*ES – 1*NQ”, it is possible to create a synthetic asset (as on the screenshot) that will show us candles that represent the relationship of 3 ES contracts for 1 NQ contract.

We can then make an stat arb when this synthetic asset, after having deviated too much from its mean (2 standard deviations), starts to come back to it.

Thanks for your help. 🙂

Spread-ES-NQ.jpg

05/30/2021 at 7:32 PM #170818 quote

robertogozzi
Moderator

Legend

It’s not possible to reference multiple assets/instruments.

05/30/2021 at 8:00 PM #170820 quote

Nicolas
Keymaster

Legend

But you can create the same chart with the Spread chart tool in Prorealtime

I think that it would also be possible to build your stat arb with Proscreener which support multi instrument programming

05/30/2021 at 11:57 PM #170827 quote

Oliviertrader2020
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Perfect. Thank you very much 🙂

05/31/2021 at 12:04 AM #170828 quote

Oliviertrader2020
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On the other hand, it is not possible to use with Pro screener, because by right-clicking, it is not possible to add the created spread in a list… and therefore it will not be possible to screener several. This could be an excellent addition for the next versions of PRT. 🙂

05/31/2021 at 12:10 AM #170829 quote

Oliviertrader2020
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Second tip: if in a future version of PRT we could backtest the spreads, buying and selling the number of underlying assets according to the conditions we would have defined, the platform would move to another level and get closer to what is done at institutional level.
But it is already very encouraging when we see the improvements that have been added in recent years (Walk forward, table …). Have a nice evening
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