Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.79 · Cointegrated: yes
Z-score: -2.94 entry / -3.09 rolling
Half-life 0.6h · Hurst 0.83 · Hedge ratio 2.09
Pair volatility: 19.90%
Backtest: 50.00% win · Sharpe -3.70 · -0.30% return · 0.37% max drawdown
Pair Analysis: Long SMH / Short USTECH
This pair is currently showing a strong mean-reversion signal, with SMH appearing statistically "cheap" relative to the broader USTECH index.
Technical Diagnostics
- Roll Z-Score (1h): -3.09 (Strong mean-reversion signal; indicates SMH is significantly undervalued relative to USTECH on a short-term basis).
- Roll Z-Score (4h): -1.42
- Correlation: 0.79 (1h) / 0.82 (4h) — indicates a strong, stable relationship suitable for pair trading.
- Half-Life: 13h (1h timeframe) / 4h (4h timeframe) — suggests the spread tends to revert relatively quickly.
- Hedge Ratio (4h): 2.153 (Sizing: ~32% SMH / ~68% USTECH).
Analysis Note
- Alignment: Your chosen direction (Long SMH / Short USTECH) is quant-optimally aligned with the current z-score signal.
- Staleness: The 1h z-score snapshot is ~1.3 hours old. Given the extreme -3.09 reading, verify if there has been a significant intraday divergence or news event affecting semiconductor stocks versus the broader tech index before entering, as the spread may have moved since the last data refresh.
- Sentiment: No specific sentiment data is currently available for these assets; the trade is driven primarily by the statistical divergence.
SMH
USTECH