Z-score (1.23) is too close to the mean to be considered for a trade.
Regime: IDLE (high confidence)
Correlation: 0.70 · Cointegrated: yes
Z-score: 2.40 entry / 1.23 rolling
Half-life 2.0h · Hurst 0.92 · Hedge ratio 0.36
Pair volatility: 16.45%
Backtest: 65.38% win · Sharpe 1.85 · 0.49% return · 0.31% max drawdown
Pair Analysis: Long JP225 / Short EWJ
- Roll Z-Score: 1.23 (1h) / 1.18 (4h)
- Correlation: 0.70 (1h) / 0.78 (4h)
- Cointegration: Yes
- Half-Life: 47h (1h) / 13h (4h)
- Hedge Ratio (4h): 0.331 (Sizing: ~25% JP225 / ~75% EWJ)
Remark:
This pair is currently exhibiting a positive Z-score, indicating that the spread is stretched with EWJ trading relatively rich compared to JP225. The trade setup (Long JP225 / Short EWJ) is aligned with the quant-optimal mean-reversion direction.
- Technicals: The pair shows strong cointegration and high correlation, typical for two instruments tracking the same underlying Japanese equity market. The 4h half-life (~13 hours) suggests a relatively fast mean-reversion process, though the 1h snapshot is slightly older (~4.3h), so monitor for intraday divergence.
- Sentiment: No specific sentiment data is available for these assets.
- Note: As these are highly correlated instruments, this trade is essentially a cross-venue/proxy arbitrage play. Ensure you are comfortable with the liquidity and fee structure on the
xyz deployer for both legs before execution.
JP225
EWJ