Empirical Analysis Of Pairs Trading Optimization Strategies

As a market-neutral statistical arbitrage strategy,pairing trading strategy has long been applied to various investment practices,which can help investors obtain higher returns in the market economy.The principle of pair trading is to select two stocks with correlation and use the difference in the mean recovery process to obtain a profit.Under the basic pair trading strategy,the optimization strategy of pair trading:early closing,delayed opening and the combination of the two has received widespread attention in recent years,and this paper considers the selection of CSI 300 stocks for empirical analysis of three optimization strategies.When deteirmining whether to implement an optimization strategy,the Hurst index is used to predict the trading signals of the time series autocorrelation.Hurst index is usually used to study the long memory of time series,so this paper attempts to use the anti-persistence of Hurst index,select different thresholds of time-varying Hurst index,compare the similarities and differences between the three optimization strategies and general pairing strategies,and construct operable pair trading strategies in combination with the actual situation in China.When judging the advantages and disadvantages of the stop-loss strategy and the general strategy through the empirical research of a pair of stocks,it can be seen that the addition of the stop-loss strategy and the strategies of early closing and postponing the opening of positions have effectively controlled the risk,and the return has also been maintained at a high level.When obtaining more statistically significant results through market evidence,the pair stocks are selected on a rolling basis based on the previous year’s data,and on this basis,six strategies are added to close early,delay opening,combine early closing and delayed opening,and use time-varying Hurst index to determine the timing.The results show that the combination strategy of early closing and delayed opening can better increase returns and reduce the maximum drawdown,and the method of using Hurst index under the same strategy is more effective.