Correlation: 0.97 · Cointegrated: yes
Z-score: 2.10 entry / 0.93 rolling
Half-life 1.3h · Hurst 0.91 · Hedge ratio 0.93
Pair volatility: 7.02%
Backtest: 37.93% win · Sharpe -1.60 · -0.28% return · 0.32% max drawdown
Pair Analysis: Long CL / Short BRENTOIL
This pair is currently exhibiting mean-reversion potential, with Brent Crude (BRENTOIL) trading rich relative to WTI Crude (CL).
- Roll Z-Score: 1.74 (1h), 0.80 (4h), 2.37 (1d)
- Interpretation: The positive Z-score confirms that BRENTOIL is statistically expensive relative to CL. The 1d Z-score of 2.37 suggests a significant divergence from the historical mean, supporting the mean-reversion trade (Long CL / Short BRENTOIL).
- Correlation: 0.97 (1h), 0.98 (4h), 0.99 (1d)
- Interpretation: Extremely high correlation indicates the assets move in lockstep, making this a tight, low-volatility spread trade.
- Hedge Ratio (4h): 0.955
- Sizing: For every $1.00 of CL (Long), you should short approximately $0.96 of BRENTOIL to maintain a delta-neutral position.
- Sentiment & Remark:
- There is no specific sentiment data for these individual oil benchmarks, though the broader commodity sector is currently bullish.
- Remark: The trade is well-aligned with mean-reversion principles. With the 1d Z-score at 2.37, the spread is extended. Monitor the 1h Z-score (1.74) for entry; if it begins to compress, the mean-reversion move is likely underway. Given the high correlation (0.99), ensure tight execution to avoid slippage on the spread.
CL
BRENTOIL