Cointegration-based pairs trading: identifying and exploiting similar exchange-traded funds
| dc.contributor.author | Chen, Kezhong | |
| dc.contributor.author | Alexiou, Constantinos | |
| dc.date.accessioned | 2025-08-11T08:23:22Z | |
| dc.date.available | 2025-08-11T08:23:22Z | |
| dc.date.freetoread | 2025-08-11 | |
| dc.date.issued | 2025-09 | |
| dc.date.pubOnline | 2025-08-06 | |
| dc.description.abstract | We examine the effectiveness of pairs trading using ETFs from 2000 to 2024, focusing on how cointegration stability affects profitability and risk. Analyzing 30 ETF pairs with different z-score thresholds, we find that lowering the threshold increases trading opportunities, boosting profits and Sharpe ratios but also raising volatility and drawdowns. Short trading windows, where cointegration holds, limit long-term profitability. While pairs trading captures short-term arbitrage, its success depends on cointegration stability. The study emphasizes the need for adaptive strategies, better pairs selection, and strong risk management for sustained profitability in changing markets. | |
| dc.description.journalName | Journal of Asset Management | |
| dc.format.extent | 464-488 | |
| dc.identifier.citation | Chen K, Alexiou C. (2025) Cointegration-based pairs trading: identifying and exploiting similar exchange-traded funds. Journal of Asset Management, Volume 26, September 2025, pp. 464-488 | en_UK |
| dc.identifier.eissn | 1479-179X | |
| dc.identifier.elementsID | 862451 | |
| dc.identifier.issn | 1470-8272 | |
| dc.identifier.uri | https://doi.org/10.1057/s41260-025-00416-0 | |
| dc.identifier.uri | https://dspace.lib.cranfield.ac.uk/handle/1826/24287 | |
| dc.identifier.volumeNo | 26 | |
| dc.language | English | |
| dc.language.iso | en | |
| dc.publisher | Springer | en_UK |
| dc.publisher.uri | https://link.springer.com/article/10.1057/s41260-025-00416-0 | |
| dc.rights | Attribution 4.0 International | en |
| dc.rights.uri | http://creativecommons.org/licenses/by/4.0/ | |
| dc.subject | 3502 Banking, finance and investment | en_UK |
| dc.subject | 3801 Applied economics | en_UK |
| dc.subject | Pairs trading | en_UK |
| dc.subject | Cointegration | en_UK |
| dc.subject | Exchange-traded funds | en_UK |
| dc.title | Cointegration-based pairs trading: identifying and exploiting similar exchange-traded funds | en_UK |
| dc.type | Article | |
| dcterms.dateAccepted | 2025-07-03 |