The distance method selects the pairs of stocks whose normalised price paths (cumulative total return indices starting at one) have the smallest sum of squared differences over a formation period, and trades them over the following trading period, opening a pair when its spread exceeds a multiple of its formation-period standard deviation and closing it when the prices cross.
Quantitative Finance · Glossário
O que é Distance method, formation period, trading period?
Também chamado de: distance method · formation period · trading period