Pair is still diverging, but the momentum is slowing. A potential reversal candidate.
Regime: PEAK_DIVERGENCE (medium confidence)
Correlation: 0.70 · Cointegrated: yes
Z-score: 1.37 entry / 1.52 rolling
Half-life 1.6h · Hurst 0.93 · Hedge ratio 0.31
Pair volatility: 14.88%
Backtest: 70.37% win · Sharpe 1.73 · 0.47% return · 0.40% max drawdown
Pair Analysis: Long JP225 / Short EWJ
This pair is currently exhibiting a mean-reversion opportunity, with the spread (EWJ relative to JP225) trading at an elevated level.
- Roll Z-Score: 1.52 (1h timeframe)
- Correlation: 0.70
- Cointegration: True
- Half-Life: 39h (~1.6 days)
- Hedge Weights (4h): 22.8% Long JP225 / 77.2% Short EWJ
Analysis:
- Mean Reversion: The 1h Roll Z-Score of 1.52 indicates that EWJ is statistically "rich" relative to the JP225 index. The trade setup (Long JP225 / Short EWJ) aligns with the quant-optimal direction to capture this divergence.
- Conviction: The cointegration is confirmed, suggesting a stable long-term relationship between the two assets. The 39h half-life suggests a moderate speed of mean reversion, implying this is a multi-day trade rather than an intraday scalp.
- Sentiment: No specific sentiment data is available for these assets at this time.
- Note on Staleness: The 1h z-score snapshot is ~1.3 hours old. Given the volatility in Japanese equity markets, verify current price action before entry to ensure the divergence has not significantly widened or closed since the last data update.
JP225
EWJ