Pair is still diverging, but the momentum is slowing. A potential reversal candidate.
Regime: PEAK_DIVERGENCE (medium confidence)
Correlation: 0.64 · Cointegrated: yes
Z-score: 1.23 entry / 2.05 rolling
Half-life 2.2h · Hurst 0.91 · Hedge ratio 0.44
Pair volatility: 34.46%
Backtest: 70.00% win · Sharpe 2.09 · 0.84% return · 0.88% max drawdown
Pair Analysis: Long POLYX / Short LTC
This setup is a mean-reversion trade targeting the relative richness of LTC against POLYX.
Statistical Diagnostics
- Roll Z-Score: 2.05 (1h) / 1.00 (4h)
- Interpretation: The positive z-score indicates LTC is currently "rich" relative to POLYX. The trade (Long POLYX / Short LTC) is aligned with the quant-optimal mean-reversion direction.
- Correlation: 0.64 (1h) / 0.57 (4h)
- Interpretation: Moderate correlation; the pair moves together but with sufficient divergence to support a spread trade.
- Half-Life: 52h (1h) / 12h (4h)
- Interpretation: The 4h half-life suggests a faster mean-reversion cycle than the 1h snapshot implies.
- Hurst Exponent: 0.91 (1h) / 0.87 (4h)
- Interpretation: High Hurst values (>0.5) indicate a trending regime rather than pure mean-reversion, suggesting the spread may continue to widen before reverting.
Sentiment & Context
- LTC (Bullish): Sentiment is positive, supported by expectations for value-driven growth in the next market cycle.
- POLYX (Neutral): Sentiment is muted with low engagement and a lack of immediate catalysts.
- Note: The bullish sentiment on LTC may act as a headwind for the Short LTC leg, potentially keeping the spread wider for longer than the z-score alone suggests.
Trade Considerations
- Direction: Aligned with the quant-optimal mean-reversion signal (Shorting the "rich" asset, Longing the "cheap" asset).
- Risk: The high Hurst exponent suggests the pair is currently trending. Ensure your stop-loss accounts for the possibility of the spread widening further before reversion occurs.
- Sizing: 4h hedge weights are 41.2% POLYX / 58.8% LTC.
POLYX
LTC