Pairs trading is a market-neutral trading strategy that seeks to profit from the relative movements of two correlated assets. The key to pairs trading is finding two assets that are highly correlated. This can be done by looking at historical data or using a correlation coefficient. We can also use …

Statistical arbitrage is a trading strategy that exploits the differences in prices between different asset classes. It has been employed, however, not only in the financial market but also in sports betting. Sports betting is a form of gambling that involves wagering on the outcome of a sporting event. Of …

The volatility index, VIX, is a measure of the stock market’s expectation of volatility over the next 30 days. The VIX is calculated by using the prices of options on the S&P 500 Index. The VIX futures are derivative contracts that allow investors to bet on the future values of …

The last decade has seen the rise in popularity of alternative data in financial analysis. This data is generally defined as any information that is not typically used in financial analysis, such as social media data, satellite imagery, and weather data. While alternative data has been used by hedge funds …

Academic and practitioners’ literature is a source for many investment and trading ideas. However, it is often criticized for producing ideas that do not work in practice. A problem we have seen repeatedly is that the published papers, more often than not, only present in-sample results and disregard out-of-sample ones. …

In a previous post, we discussed the lead-lag relationship between the volatility index, VIX, and SPX futures. In this post, we are going to look at the relationship between the VIX index and VIX futures. The volatility index, VIX, is a measure of the stock market’s expectation of volatility over …

In the financial market, momentum is the tendency for assets to continue moving in the same direction. It is a reflection of the underlying strength or weakness of an asset’s price action and can be used to identify trends. Momentum is one of the most pervasive market phenomena and can …

Data science and machine learning have made great progress in the past few years. They are being applied successfully in many areas such as computer vision, natural language processing, and predictive analytics. In the financial market, however, there are still many uncertainties and risks that the new technology cannot predict. …

Behavioural finance is the study of how financial behaviour affects economic decisions and market outcomes, and how those decisions and outcomes are affected by psychological, social, and cultural factors. It is a relatively new field that combines elements of economics, psychology, and sociology. Behavioural finance research has shown that people …

The generalized autoregressive conditional heteroskedasticity (GARCH) model is an econometric model for analyzing stock market volatility. The GARCH model is used to estimate the variance of a return, using past returns as an input into a model. It is a popular tool for measuring risk in financial markets, as it …