Pair is strongly reverting towards the mean with accelerating velocity and stable volatility.
Regime: STRONG_REVERSION (high confidence)
Correlation: 0.62 · Cointegrated: yes
Z-score: -2.27 entry / -1.81 rolling
Half-life 0.7h · Hurst 0.86 · Hedge ratio 1.45
Pair volatility: 49.27%
Backtest: 42.86% win · Sharpe 2.08 · 0.73% return · 1.57% max drawdown
Pair Analysis: SKHY / SMSN
- Roll Z-Score (1h): -1.81
- Roll Z-Score (4h): -1.42
- Correlation: 0.62 (1h) / 0.68 (4h)
- Cointegration: True
- Hedge Ratio (4h): 1.478 (Short 1.478 units of SMSN for every 1 unit of SKHY)
Analysis:
The pair is currently exhibiting a mean-reversion setup. With a 1h Roll Z-Score of -1.81, the spread is statistically "cheap" (SKHY is trading at a discount relative to SMSN based on historical cointegration). The negative z-score suggests that the current divergence is stretched, supporting a Long SKHY / Short SMSN position to capture the spread narrowing as it reverts to the mean. The 4h timeframe confirms this divergence with a z-score of -1.42. Given the cointegration is confirmed, this is a classic statistical arbitrage setup targeting the normalization of the relative price.
SKHY
SMSN