Correlation: 0.71 · Cointegrated: yes
Z-score: -1.07 entry / -1.70 rolling
Half-life 0.9h · Hurst 0.91 · Hedge ratio 0.30
Pair volatility: 43.03%
Backtest: 61.54% win · Sharpe 0.98 · 0.16% return · 0.58% max drawdown
Pair Analysis: Long SMH / Short WDC
This setup is currently aligned with the 1h and 4h quant-optimal direction. The negative z-score indicates that the SMH/WDC spread is currently stretched to the downside (SMH is "cheap" relative to WDC), supporting a mean-reversion long on the spread.
Pair Statistics
- 1h Roll Z-Score: -1.85 (Snapshot age: 1.2h)
- 4h Roll Z-Score: -1.11 (Snapshot age: 7.2h)
- Correlation: 0.71 (1h) / 0.76 (4h)
- Cointegration: True
- Half-Life: 21h (1h TF) / 6h (4h TF)
- Hedge Weights (4h): 76.7% SMH / 23.3% WDC
Analysis
- Technical Setup: The 1h z-score of -1.85 suggests a significant deviation from the mean, providing a strong statistical basis for a mean-reversion trade (Long SMH / Short WDC). The 4h timeframe confirms this alignment with a z-score of -1.11.
- Execution Note: The 1h z-score is relatively fresh (1.2h old). Given the high correlation (~0.75), the pair is behaving as a cohesive unit, which is favorable for mean-reversion strategies.
- Sentiment: No specific sentiment data is available for these assets at this time. Monitor semiconductor sector news (e.g., earnings, supply chain updates) as these are primary drivers for both SMH (the ETF) and WDC (a component).
Note: The 1d z-score (0.15) is currently neutral and stale (1.6d old), suggesting the mean-reversion opportunity is primarily visible on shorter timeframes.
SMH
WDC