Pair is strongly diverging away from the mean. High risk of further deviation.
Regime: STRONG_DIVERGENCE (low confidence)
Correlation: 0.60 · Cointegrated: yes
Z-score: -2.16 entry / -1.53 rolling
Half-life 5.8h · Hurst 0.91 · Hedge ratio 2.03
Pair volatility: 34.91%
Backtest: 55.56% win · Sharpe -1.42 · -1.09% return · 1.95% max drawdown
Pair Analysis: Long ATOM / Short ICP
This setup is a mean-reversion trade targeting the relative undervaluation of ATOM against ICP.
- Roll Z-Score: -1.53 (1h), -1.77 (4h), -1.05 (1d)
- Interpretation: The negative z-scores indicate that ATOM is currently "cheap" relative to ICP on a historical basis. The 4h z-score of -1.77 suggests a statistically significant deviation, supporting a mean-reversion entry.
- Correlation: 0.60 (1h) — Moderate correlation, providing sufficient spread stability for pair trading.
- Hedge Ratio: ~1.96 (4h) — For every $1 of ATOM long, you would short ~$1.96 of ICP to maintain a delta-neutral position.
- Sentiment: Both assets are currently facing bearish headwinds.
- ATOM: Bearish; lacks near-term catalysts despite ongoing tokenomics discussions.
- ICP: Bearish; persistent selling pressure is overriding positive ecosystem developments.
Remark:
The trade is statistically aligned with mean-reversion (buying the "cheap" ATOM against the "rich" ICP). However, the bearish sentiment on both legs suggests this is a "relative value" play rather than a directional bet. You are essentially betting that ATOM will outperform ICP (or fall less) as the spread reverts to the mean. Given the moderate correlation, monitor the spread closely for divergence, as both assets are currently struggling with broader selling pressure.
ATOM
ICP