Quantitative research of the Consumer Discretionary sector in the NYSE and NASDAQ exchanges to find an optimal pair of automotive stocks for use in a pairs trading strategy.
To employ a means-reversions strategy, whereby we expect reversions to the mean price. We find a cointegrated pair of assets in the automobile industry, using their spread as a financial instrument to be used in the trading strategy, employing the z-scores of the spread as an entry and exit threshold.
Optimal holding period as a potential exit threshold via the Ornstein Uhlenbeck calculation of the spread's mean-reversion half-life. Optimal leverage of the strategy.
• Python 3
• statsmodels
• numpy
• pandas
• matplotlib.pyplot
• Jupyter Notebook / Lab