Pair is reverting towards the mean, but either the movement is decelerating or volatility is elevated.
Regime: WEAK_REVERSION (medium confidence)
Correlation: 0.62 · Cointegrated: yes
Z-score: 1.40 entry / 1.69 rolling
Half-life 5.8h · Hurst 0.91 · Hedge ratio 0.58
Pair volatility: 38.94%
Backtest: 44.44% win · Sharpe 0.51 · 0.45% return · 1.94% max drawdown
Pair Analysis: UMA / AZTEC
- Direction: Long UMA / Short AZTEC
- Roll Z-Score (1h): 1.69
- Roll Z-Score (4h): 2.79
- Correlation: 0.62 (1h)
- Half-Life: 138h (1h) / 66h (4h)
Analysis & Remarks:
- Statistical Setup: The pair is currently exhibiting a stretched spread, with a 4h Roll Z-Score of 2.79 indicating that AZTEC is significantly "rich" relative to UMA. Your chosen direction (Long UMA / Short AZTEC) aligns with the quant-optimal mean-reversion strategy of selling the expensive leg and buying the cheaper one.
- Sentiment Context: UMA sentiment is currently bearish, driven by structural concerns regarding oracle integrity and governance risks. While the statistical setup favors a mean-reversion trade, the fundamental headwinds for UMA may exert downward pressure on the long leg, potentially complicating the convergence.
- Execution Note: The half-life (66h–138h) suggests a slow mean-reversion process. Given the bearish sentiment on UMA, monitor the spread closely for divergence rather than immediate convergence; the trade may require patience as the statistical edge plays out against a challenging fundamental backdrop.
UMA
AZTEC