Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.63 · Cointegrated: yes
Z-score: 2.69 entry / 3.13 rolling
Half-life 0.7h · Hurst 0.88 · Hedge ratio 1.02
Pair volatility: 43.13%
Backtest: 76.92% win · Sharpe 4.82 · 2.67% return · 0.89% max drawdown
Pair Analysis: Long EWY / Short AAOI
This setup is currently aligned with the quant-optimal direction, as the spread is significantly extended.
- Roll Z-Score (1h): 3.13 (The spread is statistically rich for AAOI relative to EWY).
- Correlation: 0.63 (1h)
- Half-Life: ~17 hours (1h)
- Hedge Ratio (4h): 2.03 (Sizing recommendation: 67% EWY / 33% AAOI)
Remark:
The 1h Roll Z-Score of 3.13 indicates a strong mean-reversion signal, suggesting that AAOI is currently overextended relative to the EWY index. The trade is well-aligned with the quant-optimal direction. Note that sentiment data is currently unavailable for these assets; monitor for any idiosyncratic news on AAOI (e.g., earnings or sector-specific volatility) that could decouple it from the broader index. The 1h z-score is ~1.3 hours old; verify current price action before entry.
EWY
AAOI