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Pairs Trading, Cryptocurrencies and Cointegration: A Performance Comparison of Pairs Trading Portfolios of Cryptocurrencies Formed Through the Augmented Dickey Fuller Test, Johansen’s Test and Phillips Perron’s Test
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2019 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This thesis analyzes the performance and process of constructing portfolios of cryptocurrency pairs based on cointegrated relationships indicated by the Augmented Dickey-Fuller test, Johansen’s test and Phillips Peron’s test. Pairs are tested for cointegration over a 3-month and a 6-month window and then traded over a trading window of the same length. The cryptocurrencies included in the study are 14 cryptocurrencies with the highest market capitalization on April 24th 2019. One trading strategy has been applied on every portfolio following the 3-month and the 6-month methodology with thresholds at 1.75 and stop-losses at 4 standard deviations. The performance of each portfolio is compared with their corresponding buy and hold benchmark. All portfolios outperformed their buy and hold benchmark, with and without transaction costs set to 2%. Following the 3-month methodology was superior to the 6- month method and the portfolios formed through Phillips Peron’s test had the highest return for both window methods.

Place, publisher, year, edition, pages
2019. , p. 48
Keywords [en]
Cointegration, Statistical arbitrage, Cryptocurrency, Pairs trading, Algorithmic trading
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:uu:diva-385484OAI: oai:DiVA.org:uu-385484DiVA, id: diva2:1324527
Subject / course
Statistics; Statistics
Educational program
Bachelor Programme in Business and Economics; Bachelor Programme in Social Sciences
Supervisors
Examiners
Available from: 2019-06-24 Created: 2019-06-13 Last updated: 2019-06-24Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
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  • Other locale
More languages
Output format
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