Currency Pairs Trading

Investment Summary
A stationary portfolio is formed of currencies whose countries have similar economic fundamentals. Australia and Canada are countries highly dependent on the commodity cycle. AUD (Australian Dollar) and CAD (Canadian dollar) are often named commodity currencies. A stationary portfolio with AUD and CAD is structured and a mean reversion strategy is executed with consistent profitability and low volatility.

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Investment Performance (Good Investment Selection Guide)
Investment Return (?): 11% Volatility (?): 6.5% Sharpe Ratio: 1.65 Maximum Drawdown: -7.60%

Investment’s Fundamental Concept:
Profitable Mean Reversion Strategies can be formed with currencies of countries which have similar economic fundamentals. For example Australia and Canada are economies highly dependent on the global commodity cycle and hence their currencies can form a stationary portfolio.

Investment’s Logic:

A stationary portfolio is formed of currencies whose countries have similar economic fundamentals. Australia and Canada are countries highly dependent on the commodity cycle. AUD (Australian Dollar) and CAD (Canadian dollar) are often named commodity currencies. A stationary portfolio with AUD and CAD is structured and a mean reversion strategy is executed with consistent profitability and low volatility.

Johansen test is used to form a stationary portfolio and a classic mean reversion strategy is formed.

Other Investment Strategy Characteristics:
Investment Type: Statistical Arbitrage Investment Risk: 1/5 Very Low Backtest Range: 30-40 years Rebalancing period: Intraday
Investment Strategy Markets:
  • USD.AUD
  • USD.CAD