Pair is reverting towards the mean, but either the movement is decelerating or volatility is elevated.
Regime: WEAK_REVERSION (medium confidence)
Correlation: 0.79 · Cointegrated: yes
Z-score: -1.31 entry / -2.02 rolling
Half-life 4.4h · Hurst 0.90 · Hedge ratio 0.52
Pair volatility: 32.16%
Backtest: 76.92% win · Sharpe 0.82 · 0.44% return · 2.18% max drawdown
Pair Analysis: Long FIL / Short WIF
- Roll Z-Score: -2.02 (1h) | -1.48 (4h) | -1.45 (1d)
- Interpretation: The spread is currently significantly "cheap" (FIL is undervalued relative to WIF). The negative z-score across all timeframes indicates a stretched deviation, supporting a mean-reversion entry (Long FIL / Short WIF).
- Correlation: 0.79 (1h) | 0.74 (4h) | 0.60 (1d)
- Interpretation: Moderate-to-high correlation, though it has weakened on the daily timeframe.
- Cointegration: Confirmed across all timeframes.
- Half-Life: 107h (1h) | 27h (4h) | 6h (1d)
- Interpretation: The 4h and 1d half-lives suggest a relatively fast mean-reversion potential once the spread begins to close.
Sentiment & Technical Context
- FIL: Sentiment is bearish, with community focus on long-term structural concerns. However, the deep negative z-score suggests the asset may be oversold relative to its pair, potentially offering a contrarian entry point for a mean-reversion trade.
- WIF: Sentiment is also bearish, characterized by a collapse in retail volume and a loss of narrative momentum.
- Trade Note: This is a relative value play between two assets currently facing negative sentiment. The trade relies on the statistical expectation that the spread will revert to the mean (FIL outperforming WIF or WIF underperforming FIL) rather than a directional bet on either asset's absolute price.
Note: The 1h z-score is ~1.3h old; verify current price action before entry, as significant intraday moves can impact the spread.
FIL
WIF