Tag Archives: Mean Reversion

Pair Trading Strategy Enhancement

April 10, 2026 12:11 pm |
Go Hybrid: Mean-Reversion Framework PLUS Technical Bias Filtering pair trading strategy enhancement

Pairs trading remains one of the most widely used market-neutral strategies, built on the principle of exploiting mean reversion in a spread constructed from two related assets. However, traditional implementations—typically based on cointegration tests and z-score entry/exit thresholds—face well-documented limitations, including instability across regimes and declining profitability in modern markets (Tenyakov & Mamon, 2017). So in this blog post we suggest our own pair trading strategy enhancement: combine cointegration and z-score based trading signals with refined technical trading indicators to create a Relative Edge indicator.

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Kalman Filters vs. PairTrade Finder®

March 26, 2026 3:38 pm |
Why We Keep It Simple (On Purpose) Kalman filters

From time to time, experienced traders reach out and ask:

“Why doesn’t PairTrade Finder® use a Kalman filter to calculate dynamic hedge ratios?”

It’s a fair question. Kalman filters are widely used in quantitative finance and are often presented as a more advanced way to trade pairs.

So this post explains our thinking clearly.

PairTrade Finder® is designed to capture most of the statistical edge—without the complexity that often reduces real-world performance.

In practice, as a rule we seek to target a platform that delivers 80% of the benefit of institutional grade models with around 20% of the complexity.

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