A Comprehensive Methodology for Pairs Trading Strategy and Performance Evaluation
Bibliographic record
Abstract
This study outlines some integrated approaches for pairs trading and portfolio analysis, focusing on the performance in generating consistent returns under varying market conditions over one year. The relationships between returns and some relevant factors are also explored. Steps for pairs trading involve selecting securities with strong historical associations or return correlations, normalizing their price series, calculating related price statistics, and employing a strategy based on Z-score to identify trading opportunities. Regression analysis of performance metrics across thousands of pairs highlights the significant relationship between the standard deviation of spread and profitability, whereas the return correlation is insignificant. The chosen portfolio exhibits low volatility, a high Sharpe ratio, and minimal drawdowns. Incorporating trading costs reveals a break-even point where the overall profit is zero. This confirms the strategy's robustness and real-world feasibility. In this paper, our result is against the weak form of the market efficiency theory, showing that strategies based on past information can generate consistent returns.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.016 | 0.039 |
| Meta-epidemiology (narrow) | 0.002 | 0.001 |
| Meta-epidemiology (broad) | 0.002 | 0.002 |
| Bibliometrics | 0.007 | 0.004 |
| Science and technology studies | 0.001 | 0.001 |
| Scholarly communication | 0.003 | 0.003 |
| Open science | 0.002 | 0.002 |
| Research integrity | 0.001 | 0.002 |
| Insufficient payload (model declined to judge) | 0.006 | 0.002 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".