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CORRELATION EminiS&P-Russel2000

Discussion in 'Trading' started by NickBarings, Oct 19, 2004.

1. NickBarings

Anybody has any numbers oe an estimation on this correlation ?

2. Jabez1947

None that you can take to the Bank. Followed them both for years.

3. abogdan

Actually, I have an arbitrage system that uses this spread. You can make around 0.5 point a day fairly reliably.

4. stock777

Dunno, since there's a fairly flimsy corellation , how can you claim a half point is reliable. And its not arbitrage, its a pair trade if anything.

5. abogdan

If you balance the contract value precisely it becomes the arbitrage. The trick it is to find the mutually acceptable contract size that makes correlation higher than 0.95
Cheers,

6. ProfLogic

There is as much correlation between the ES & AB as there is between a Porsche AWD Cabriolet and a Volkswagen Bug.

7. riskarb

Absurd... but funny

8. stock777

I was just about to devote the next 100 days to the search for the equalibrium point. Are you saying I should find a new hobby?

9. mind

i assume this indicates something like vola adjustment for position size in both instruments. i assume that "position size" or "number of contracts" is what you actually mean instead of contract size.
cointegration does a job like this. if you have two data series, you try to find a linear combination of the two that is stationary, thus fluctuates more or less regularily [i am not an english native, and "regularily" uses to remind me of that - it "nods" my tongue! even when i just write it!] around zero.
now it could be - and if that is the case i would find this interesting - that you found that by multiplying the russel with the voladifference [maybe expressed int erms of range to make it adjust immediately] of russel and emini you end up with a "new" russel that correlates highly with eminis. funny thing to think of what you are actually trading then ... probably a mixture between delta- and vegaCorrelation.

peace

10. FredBloggsGuest

1 es = \$12.5 per tick
1 er = \$10 per tick

so you need 8 (\$100) es against 10 (\$100) er, or multiple of that to have a balanced spread right?

just curious

#10     Oct 20, 2004
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