Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.69 · Cointegrated: yes
Z-score: 1.24 entry / 1.61 rolling
Half-life 1.6h · Hurst 0.93 · Hedge ratio 0.36
Pair volatility: 14.87%
Backtest: 67.86% win · Sharpe 1.45 · 0.39% return · 0.40% max drawdown
Pair Analysis: JP225 / EWJ
- Roll Z-Score: 1.61 (1h) | 1.18 (4h) | 1.03 (1d)
- Correlation: 0.69 (1h) | 0.77 (4h) | 0.85 (1d)
- Cointegration: True
- Half-Life: 38h (1h) | 11h (4h) | 1h (1d)
Technical Setup:
The pair is currently exhibiting a positive Z-score (1.61 on the 1h timeframe), indicating that EWJ is statistically "rich" relative to JP225. Your proposed direction (Long JP225 / Short EWJ) aligns with a mean-reversion strategy, betting on the spread narrowing as EWJ potentially underperforms or JP225 outperforms to close the gap.
Sentiment/Context:
No specific sentiment data is available for these assets. Given the positive Z-score, the trade is technically positioned for a reversion, but the 1h Z-score is ~1.3 hours old; verify if significant price action has occurred since the snapshot. The 4h and 1d Z-scores are also positive, suggesting a consistent, albeit moderate, divergence across timeframes.
JP225
EWJ