The metal Palladium (ETF: PALL) may be used as a close substitute for Platinum (ETF: PTM) in a variety of industrial processes and material uses. With the trade history for PALL finally giving us enough for quantitative analysis, I thought that this substitution property would make for an interesting securities pairing test using the tools in ETF Rewind Pro, as presented below:
While this model solution is far from perfect, I really like the frequency of trades and overall linearity of the equity curve. Also, looking at grid space returns for idealized parameters, I see that the maxima is fairly broad with respect to look-back and z-scores, an important attribute before considering a trading any model.
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