Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.80 · Cointegrated: yes
Z-score: -1.23 entry / -1.69 rolling
Half-life 1.6h · Hurst 0.91 · Hedge ratio 2.13
Pair volatility: 39.93%
Backtest: 57.69% win · Sharpe 2.06 · 1.83% return · 2.34% max drawdown
Pair Analysis: Long FARTCOIN / Short SOL
This setup is a mean-reversion play on the FARTCOIN/SOL spread. The pair is currently showing a negative z-score, suggesting the spread is statistically "cheap" (FARTCOIN is relatively undervalued against SOL).
Statistical Diagnostics
- Roll Z-Score: -1.69 (1h) / -1.23 (4h) — Indicates the spread is currently below its mean, supporting a long-FARTCOIN/short-SOL bias.
- Correlation: 0.80 (1h) — Strong positive correlation, making this a viable pair for spread trading.
- Cointegration: True (1h) — Suggests a stable long-term relationship between the two assets.
- Hedge Weights (4h): 38.2% FARTCOIN / 61.8% SOL (Hedge Ratio: 1.615).
Sentiment & Market Context
- FARTCOIN: Neutral. While there is some smart-money accumulation, the asset suffers from thin liquidity, which can lead to higher volatility and slippage during execution.
- SOL: Bullish. Supported by institutional interest and a durable bid, SOL acts as a strong, high-liquidity anchor for the short leg of this pair.
Remark
This is a mean-reversion trade betting that FARTCOIN will outperform SOL (or recover relative to it) as the spread reverts to its mean. The negative z-score provides a solid entry signal for this direction. However, be mindful of the liquidity disparity: FARTCOIN's thin order book compared to SOL's institutional depth means this trade is sensitive to sudden market-wide moves where SOL might hold up better than FARTCOIN. Ensure your sizing accounts for the higher volatility of the FARTCOIN leg.
FARTCOIN
SOL