Index Arbitrage

Investment Summary
Index Arbitrage structures a portfolio of stocks from stocks with equal capital weight which are components of SPY and cointegate with SPY strictly. The resulting portfolio is checked for cointegation with Johansen test with SPY. A linear mean reversion stratgy is fromed for the specific portfolio.

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Investment Performance
Investment Return (?):4.5%Volatility (?):3.2%Sharpe Ratio:1.4Maximum Drawdown:-2.5%
Investment’s Fundamental Concept:
Index Arbitrage is a strategy where the difference in value between a portfolio of stocks constituting an index and the futures on that index is traded. If the stocks are weighted in same way as the index is structured, then the market value of the portfolio will cointegrate with the index futures and a mean reversion strategy can be formed.
Investment’s Logic:
A portfolio of stocks is structured from stocks with equal capital weight which are components of SPY and cointegate with SPY strictly. The resultin portfolio is checked for cointegation with Johansen test with SPY. A linear mean reversion stratgy is fromed for the specific portfolio
Other Investment Strategy Characteristics:
Investment Type:Statistical ArbitrageInvestment Risk:1/5 Very LowBacktest Range:30-40 yearsRebalancing period:Daily
Investment Strategy Markets:
  • US Stocks
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