Synthetic hedges, cointegration, mean reversion and similar stuff

Quoting beyon

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I'm currently implementing a quite similar approach in JForex with Dukascopy and a R connection to Java.
My findings at today are as follows:

1) Don't integrate pairs with ultra-high correlation like say EURUSD/USDCHF. Any type of regression on one of these pairs will give a 1-1 regression. Thus the coefficients are almost the same and we really trade then EUR/CHF because we've cancelled the USD exposure out. This is useless since we pay the spread twice.

2) All combination of pairs will generate very similar spread plots for some basket...

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Quoting Dirtybrown

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Wow well you have put quite a bit of research into it then, good idea to store everything in a database. since you're using c#, I assume sql server?


have you found anything on the relationship between usdcad and nzdusd? From what I've seen on the thread and some experiments i did last year, they make a great couple.

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Quoting Dirtybrown

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Well I am now starting my own experimentation in R being totally new to using R or any true statistical package besides excel. I will follow this example for finding cointegrated pairs http://quanttrader.info/public/testForCoint.html

Also got a copy of this book: http://www.amazon.com/gp/product/0387759662

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SET NOCOUNT ON

DECLARE      @Sample TABLE
      (
            RowID INT IDENTITY(1, 1) PRIMARY KEY CLUSTERED,
            Postal VARCHAR(50) NOT NULL,
            ZipCode VARCHAR(50) NOT NULL,
            City VARCHAR(50) NOT NULL,
            Country VARCHAR(50) NOT NULL,
            Status SMALLINT,
            Accuracy TINYINT,
            Lat DECIMAL(9, 6),
            Lon DECIMAL(9, 6),
            CreDate DATETIME
      )            

INSERT      @Sample
SELECT      'One Microsoft Way', '98052-6399', 'Redmond, WA', 'USA' UNION ALL
SELECT      '170 W. Tasman Dr.', '95134', 'San Jose, CA', 'USA' UNION ALL
SELECT      '500 Oracle Parkway', '94065', 'Redwood Shores, CA', 'USA'

-- Initialize
DECLARE      @url VARCHAR(300),
      @win INT,
      @hr INT,
      @Text VARCHAR(8000),
      @RowID int,
      @Status smallint,
      @Accuracy tinyint,
      @Lon decimal(9, 6),
      @Lat decimal(9, 6)

SELECT      @RowID = MIN(RowID)
FROM      @Sample
WHERE      Status IS NULL

WHILE @RowID IS NOT NULL
      BEGIN
            SELECT      @url = 'q=' + Postal + '+' + ZipCode + '+' + City + '+' + Country
            FROM      @Sample
            WHERE      RowID = @RowID

            SET      @url = 'http://maps.google.com/maps/geo?' + @url
            SET      @url = @url + '&output=csv&key={your google api key here}'

            EXEC @hr = sp_OACreate 'WinHttp.WinHttpRequest.5.1', @win OUT
            IF @hr <> 0 EXEC sp_OAGetErrorInfo @win

            EXEC @hr = sp_OAMethod @win, 'Open', NULL, 'GET', @url, 'false'
            IF @hr <> 0 EXEC sp_OAGetErrorInfo @win

            EXEC @hr = sp_OAMethod @win, 'Send'
            IF @hr <> 0 EXEC sp_OAGetErrorInfo @win

            EXEC @hr = sp_OAGetProperty @win, 'ResponseText', @Text OUT
            IF @hr <> 0 EXEC sp_OAGetErrorInfo @win

            EXEC @hr = sp_OADestroy @win 
            IF @hr <> 0 EXEC sp_OAGetErrorInfo @win 

            SET      @Text = REPLACE(REPLACE(@Text, '.', '#'), ',', '.')

            SELECT      @Status = PARSENAME(@Text, 4),
                  @Accuracy = PARSENAME(@Text, 3),
                  @Lat = REPLACE(PARSENAME(@Text, 2), '#', '.'),
                  @Lon = REPLACE(PARSENAME(@Text, 1), '#', '.')

            UPDATE      @Sample
            SET      Accuracy = @Accuracy,
                  Lat = @Lat,
                  Lon = @Lon,
                  Status = @Status,
                  CreDate = GETDATE()
            WHERE      RowID = @RowID

            WAITFOR      DELAY '00:00:00.010'

            SELECT      @RowID = MIN(RowID)
            FROM      @Sample
            WHERE      Status IS NULL
      END

SELECT      *
FROM      @Sample 

Quoting Dirtybrown

Disliked

Hi Ultimate. Are you manually loading data in sql server or through some automated means?

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Quoting Ultimate6

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I've got an app that imports mt4 .hst files into sql. Then I have a simplish solution that sends quotes from mt4, uses an EA.

I will have a look at this place you found thanks.

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Quoting Dirtybrown

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Oh ok. I've been looking at custom DLL solutions. Lots of examples, but each seems to be a pain in the a$$ to implement correctly.

Someone point this out:

[i]5. Fees, Settlement and Payment.
As of the Effective Date, there is no charge for the access and use of the System pursuant to the terms herein. Integral may institute and/or modify a fee for access and use of the System upon no less than 45 days notice, which notice may occur by announcement on or through the System or on Integral's website. You shall pay all taxes, levies or duties...

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Quoting Ultimate6

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I'm looking at this site, seems great - and I asked myself why is this free. Must cost a bit to run this operation of theirs. Perhaps if you select in your profile that you are institutional then they come to you for money.

Ok my interpretation:

"Integral may institute and/or modify a fee for access" - so they may start charging and if they do they may also change the price.

"upon no less than 45 days notice, which notice may occur by announcement on or through the System or on Integral's website." - they must give you 45 days notice...

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Quoting Dirtybrown

Disliked

Right, you barely give them any information before you can immediately use the API. So they don't seem over concerned with retailers consuming data by first impressions.


Doing some more reading, according to this making http requests directly from sql server is a bad idea:

http://stackoverflow.com/questions/3...from-tsql-code

Instead, you can invoke CLR directly from a stored proc using a wsdl for better resource management. I think I'll try this route:

http://webcache.googleusercontent.co...&ct=clnk&gl=us

My...

Ignored

Quoting Ultimate6

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Seems the parent company http://www.integral.com runs quite a serious operation, so suppose this free service could attract business for them.

I was thinking of writing a .net assembly that you register in sql and can use from a proc.

I have trouble sleeping at night because of the thoughts about this project

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Quoting Dirtybrown

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True. They seem sort of like currenex, just a lot newer so this gets their name out. Great idea Are you a .net developer by trade? I'm more of a hack, but can figure out examples.

And glad I wasn't the only one staying up till 2 AM.. Yeah, we have some real potential here..

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Quoting Ultimate6

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Yes I am. I'm busy working on a thing to be able to actually back test this stuff. I will squeeze in the time somewhere to make a solution for us to pull their data into sql going soon.

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Quoting Ultimate6

Disliked

Yes I am. I'm busy working on a thing to be able to actually back test this stuff. I will squeeze in the time somewhere to make a solution for us to pull their data into sql going soon.

Ignored

Quoting Dirtybrown

Disliked

Attachment

here's another experiment simply throwing all of the majors together. I run a custom VSA template on the spot dollar index using sigtrader. Seeing that it was in the middle of its range this morning before the NY stock market open, I entered the recommended arbomat trades while the price line was within 1 deviation of the blue center line. So far now, profitable.

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Quoting Dirtybrown

Disliked

Yeah I like to just play around to see what happens. It probably just looks like the trend indicator because I have widened the R display screen. my computer is connected to a 55 inch LED flatscreen so thats why everything seems big and the resolution is so high.

Seeing the live dollar spot index on sigtrader (offered by liteforex) is really valuable to see where the market is going. And it seems if you are hedged on every major pair, there's a hopscotch effect of the money flow. Then you really don't care what any single pair does. This seems...

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