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Where
can I go to learn more about SSA?
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By the
way... I did say 8,000+ stocks, but reality there would be far
fewer. I do pass all 8,000+ through my filters, but I'm only
interested in stocks above a certain price and with a minimum turnover,
etc.
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<FONT face="Times New Roman"
size=2>-----Original Message-----From: nkis22
[mailto:nkishor@xxxxxxxxxx]Sent: Tuesday, April 29, 2003 5:48
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
(More) Real World TradingHi Chuck,I have
often successfully traded one sided DIA-options using thesame pairs idea.
The pair I use comes from The Dow Theorythat specifies the relation
between TANSPORTATION and DJiAThe critical thing is that the
correlation between anypair must be there atleast in theory or some solid
reasoningas to why the pair ought to be correlated. With 8000
stocksthere would be about 64 million correlated pairs, and somevery
stong correlations will appear just by chance. With smaller sets of
stocks, I have looked at relatednessvia SSA ( a type of Euclidean
distance) analysis thatwill show different clusters. I am going in this
directionbut have not developed a system or even done a single trade
asyet. I think SSA is better than looking at correlations whichcan be
"dishonest" or "spurious" and quite there by chnace. Giveus an example,
may age and the price of gasoline is extremelyhighly correlated but
meaningless!Interested in your work very
much.tianand--- In amibroker@xxxxxxxxxxxxxxx,
"Chuck Rademacher" <chuck_rademacher@x> wrote:> You may
recall that I have been making a concerted effort to come up with>
some system ideas using "pairs trading". I don't know how
successful any> of you have been at coming up with systems for
shorting stocks, but I am> extremely frustrated by the need to
maintain a dollar and/or beta neutral> portfolio in keeping with
the rules of the funds that I manage. As a rule,> my short
trades are lucky to break even. Fortunately, my long trades
are> quite profitable.> > I am going to put forth some
ideas that should have been more obvious to me> some time ago and
may already be obvious to you. Like a lot of you, I
have> what I think are excellent systems for trading the long
side. I also have> excellent systems for trading
"pairs". My pairs trading has been 100%> isolated from
the other styles of trading that I do.> > My daily search for
pairs to trade never really had a starting point>
(watchlist). The system takes each of the currently active stocks
(8,000+)> and tries to find another stock to trade against
it. There was no starting> bias. The system
looks for the most highly correlated pairs of stocks to> trade; one
long and one short.> > Late yesterday, I had a thought come to
me to take the just the buy signals> generated by my best "long"
system and only look for a pair to trade against> each of
those. It's early days in the research, but it looks like an>
exceptionally good idea. Instead of making a mediocre 1.5 to 2%
per month,> the research suggests almost doubling that return while
still maintaining a> dollar, beta, sector and volatility neutral
stance.> > Any comments would be appreciated and I'd be happy to
work closely with> anyone interested in pursuing this
endeavour. AmiBroker is definitely the> tool of choice
for this job, hence my posting to this group.> >
CheersSend
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