Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.68 · Cointegrated: yes
Z-score: -1.55 entry / -2.24 rolling
Half-life 5.8h · Hurst 0.94 · Hedge ratio 0.67
Pair volatility: 38.53%
Backtest: 75.00% win · Sharpe 2.17 · 1.99% return · 1.45% max drawdown
Pair Analysis: BOME / CAKE
- Roll Z-Score (1h): -2.24
- Roll Z-Score (4h): -1.67
- Roll Z-Score (1d): -1.90
- Correlation: 0.68 (1h)
- Half-Life: ~5.8 days (1h)
Analysis:
- Statistical Setup: The pair is currently showing a significant negative z-score across all timeframes, indicating that BOME is statistically "cheap" relative to CAKE. A Long BOME / Short CAKE position is a classic mean-reversion play, betting that the spread will tighten as BOME recovers or CAKE cools off.
- Sentiment Conflict: There is a strong divergence between the statistical signal and fundamental sentiment. Internal sentiment analysis flags BOME as Bearish (lack of narrative fuel) and CAKE as Bullish (undervaluation/burn dynamics).
- Risk Note: While the statistical setup is compelling (z-score < -2), the fundamental sentiment is currently working against the trade. Mean reversion trades often struggle when the "cheap" asset has a bearish fundamental outlook and the "rich" asset has a bullish one, as the spread may widen further rather than close. Proceed with caution; ensure your stop-loss is tight if the spread continues to diverge.
BOME
CAKE