Analyzing graphs and defining a pair of under-rated and over-valued asset forms part of digital trade management. The proportion of each asset in the portfolio should be calculated on the basis of both the Beta assets at the time of the transaction.
If the current deviation of the ratio of its moving average depth is in the negative area, it means that the activity is located in the numerator is underestimated relative to the asset located in the denominator. Conversely, if the current deviation of the ratio of its moving average depth is in the positive area, it means that the activity located in the numerator is overestimated relative to the asset located in the denominator.
In addition, since the value of Beta is not constant, it is periodically necessary to adjust the structure of the portfolio, to maintain it in a market- neutral state. When the ratio of assets to reach its average value is reverse transactions with a view to profit.
Despite the seeming simplicity of the strategy, it has its own pitfalls. The fact that the absolute deviation does not take into account the volatility of relations that represents certain risks. For example, the absolute deviation may show an opportune moment to enter a position, as it is at the maximum or minimum values of the historical forming support and resistance levels.
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