Implementation
Implementation of statistical arbitrage follows a modular architecture. Configuration files define parameters, strategy modules handle logic, and exchange adapters manage execution.
Performance Metrics
Key metrics include Sharpe ratio, maximum drawdown, win rate, profit factor, and average trade duration. Compare against baseline strategies and adjust parameters based on out-of-sample results.
| Metric | Value | Benchmark |
|---|---|---|
| Sharpe Ratio | 1.85 | 1.20 |
| Max Drawdown | -12.4% | -18.0% |
| Win Rate | 58.2% | 52.0% |
| Profit Factor | 1.72 | 1.45 |
Core Concepts
Understanding statistical arbitrage requires familiarity with market microstructure, order flow dynamics, and execution latency. The following sections detail each component.
Risk Considerations
Risk management for statistical arbitrage addresses position limits, stop loss placement, correlation exposure, and worst-case drawdown scenarios. Regular monitoring prevents drift from intended behavior.
Testing Approach
Testing statistical arbitrage includes unit tests for signal logic, integration tests for exchange interaction, and backtests against historical data with realistic slippage modeling.