Pair is strongly reverting towards the mean with accelerating velocity and stable volatility.
Regime: STRONG_REVERSION (high confidence)
Correlation: 0.64 · Cointegrated: yes
Z-score: -1.78 entry / -1.51 rolling
Half-life 4.4h · Hurst 0.94 · Hedge ratio 0.76
Pair volatility: 43.92%
Backtest: 62.50% win · Sharpe -0.80 · -0.65% return · 1.89% max drawdown
Pair Analysis: Long EWY / Short WDC
This setup is currently quant-aligned with the mean-reversion signal, as the spread is trading at a significant discount to its historical mean.
Technical Diagnostics
- Roll Z-Score (1h): -1.51
- Roll Z-Score (4h): -1.96
- Roll Z-Score (1d): -2.02
- Correlation: 0.64 (1h) to 0.80 (1d)
- Hedge Ratio (4h): 0.611 (Long 62.1% EWY / Short 37.9% WDC)
Analysis
- Mean Reversion: The negative z-scores across all timeframes indicate the EWY/WDC spread is currently "cheap" (undervalued) relative to its historical mean. Your directional intent (Long EWY / Short WDC) is aligned with the quant-optimal direction, effectively betting on the spread to mean-revert upward.
- Conviction: The 4h and 1d z-scores (approaching -2.0) suggest a strong statistical deviation. While the 1h z-score is slightly less extreme (-1.51), the multi-timeframe alignment reinforces the potential for a mean-reversion move.
- Sentiment/News: No specific sentiment data is available for these assets. Given the divergence, monitor for idiosyncratic news in the South Korean equity market (EWY) or the storage/semiconductor sector (WDC) that may have caused this recent spread compression.
Note: Z-scores are snapshots (1h age ~1.3h, 4h age ~5.3h). Verify recent price action to ensure the spread hasn't already begun a rapid correction.
EWY
WDC