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Research Paper | Statistics | South Africa | Volume 7 Issue 2, February 2018 | Rating: 6.7 / 10
Implementation of Statistical Arbitrage to Retail Sector Using a Two-Stage Correlation and Cointegration Approach
Johannes Tshepiso Tsoku, Ntebogang Dinah Moroke
Abstract: The study implemented the statistical arbitrage technique to retail sector using a two-stage correlation and cointegration approach. The study used a daily time series data ranging from 04 January 2010 to 31 December 2015. The analysis of the study was computed using Eviews 9. The results of correlation analysis revealed that only six pairs of stocks were found to be highly correlated. Of the six preselected pairs, only three pairs were found to be cointegrated. Statistical arbitrage was then implemented to the cointegrated pairs. This strategy revealed a single trade possible for LWHL LBTI and LWHL-LSAB pair. Therefore, an investor had an opportunity of making profit from the two traded pairs in the retail sector. Recommendations for further studies were formulated from the results of the study.
Keywords: Correlation, Cointegration, Statistical arbitrage strategy, financial data
Edition: Volume 7 Issue 2, February 2018,
Pages: 1263 - 1272