Back

Dual Listed Arbitrage Strategy that works on paper, not in code

I thought I would share a strategy I've been interested in recently, and that's dual listed arbitrage.

Theory is that dual listed stocks with greater voting rights (ie UA vs UAA) should track each other very closely and the spread between UAA and UA should reflect the premium one gets for getting greater voting rights.

When that spread increases to a level that is out of the ordinary, it is time to buy the cheaper stock and short the expensive stock. I just implemented the long strategy, but feel free to add a short component as well.

Also and suggestions and comments are more than welcome!

Update Backtest








Nice idea Manik!  SetBenchmark is a reserved name, you might want to rename that method as it will conflict with QC's API and I'm not sure what will be called. I think magic number might need to be calculated / tuned based on something more fundamental:

if self.PercentDiff > .070:
0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


I tried to add the rules to trade the dual asset. But the sharpe is still negative.

0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


I worked on something very similar to this regarding GOOG and GOOGL shares and while it worked on first run, slippages ended up resulting in a net negative. I thought it would be interesting to look into adding a "liquidity" filter for lack of a better word, using historical volume at x Time to determine if it would be liquid enough on both ends to take the trade.

0

Update Backtest





0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Loading...

This discussion is closed