Cointegration for forex using ARMA model to forecast the spread

Cointegration for forex using ARMA model to forecast the spread

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David Hoareau · External communityPost link
External question — Quantitative Finance Stack Exchange Author: David Hoareau Original post: https://quant.stackexchange.com/questions/26277 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I am working on an automatized quantitative strategy that use cointegration in Forex. I am backtesting this strategy in Python. Please see below the python file: https://drive.google.com/file/d/0B1AEYFPAAAE6eW5XeHlkTXprVUU/view?usp=sharing See below the data that I used to backtest: https://drive.google.com/file/d/0B1AEYFPAAAE6amx0RWI1MGh3SW8/view?usp=sharing My Algorithm is: Read File Transform the data with the log return Treat Outliers Realize the linear regression Test for cointegration with ADF test If the spread is stationary then apply the best ARMA model Forecast and using beta calculation to control the risk The equity curve of this strategy is: Could you please help to understand how can I improve this algo? Thanks
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