As promised yesterday here’e the ETFR view of the GLD/FXE spread looking back 6 months. The mean reversion behavior is apparent on the A) Relative Price Change chart as well as section B. While this isn’t a barn burner in terms of P&L returns, the linearity correlation is attractive and tends to trade on an 8 day cycle. This is more of a revenue stream type of pair trade and the low drawdown reflects a no stop trading milieu. Had we activated the EQ stop (no trade executed if equity curve below the R2 slope) the P&L return jumps to 26%. Note the trade status as of today’s close.
Related posts:
