The strategy in abstract form is simple. There are two equities ZOO and POO and I want to test 30 minute bar data.
Let X be the difference in price of POO and ZOO at a given time.
The trading order is going long ZOO and POO in an A:B ratio.
Let C be the cost of that order while ignoring market impact and only considering predicatable costs.
If X > C for the Slice :
execute the trade of going long POO and ZOO in an A:B ratio.
If X = 0
Liquidiate net position.
Close all positions at market close.
Other things:
In the future, I intend to backtest this strategy comparing ZOO to a basket of POO's where the A:B ratio of the order depends on what POO actually is.
In my mind this is a toy example of pairs trading, so I imagine this is extremely simple to implementm, but I am having a hard understanding which modules I need to tweak and custom build.
Thanks in advance to anyone who even read all of this!
Best,
Roman