Pair is still diverging, but the momentum is slowing. A potential reversal candidate.
Regime: PEAK_DIVERGENCE (medium confidence)
Correlation: 0.67 · Cointegrated: yes
Z-score: -3.67 entry / -5.18 rolling
Half-life 1.3h · Hurst 0.88 · Hedge ratio 0.94
Pair volatility: 34.14%
Backtest: 74.07% win · Sharpe 1.33 · 1.01% return · 2.83% max drawdown
Pair Analysis: Long STX / Short XAI
- Roll Z-Score (1h): -5.18
- Roll Z-Score (4h): -4.07
- Roll Z-Score (1d): 0.41
- Correlation: 0.67 (1h)
- Cointegration: True (1h/4h)
- Hedge Ratio (4h): 0.789 (Sizing: 55.9% STX / 44.1% XAI)
Analysis & Remark
This setup is a aggressive mean-reversion play targeting the extreme short-term divergence between the two assets. The 1h and 4h z-scores are deeply negative (-5.18 and -4.07), indicating that STX is currently significantly "cheap" relative to XAI on a short-term basis. While the 1d z-score is slightly positive (0.41), suggesting a potential conflict with longer-term trends, the strong cointegration on shorter timeframes supports the mean-reversion thesis.
Sentiment Context
Both assets are currently facing bearish sentiment. STX is struggling with persistent selling pressure and a failed breakout, while XAI is weighed down by negative brand association and subdued volume. Because both legs are bearish, this trade is effectively a "relative value" bet: you are betting that STX will outperform (or decline less than) XAI as the spread reverts to its mean. Given the bearish backdrop for both, ensure tight risk management, as a broader market downturn could drag both assets down simultaneously, potentially widening the spread further despite the current statistical signal.
STX
XAI