negative-researchmarket-neutralkalman-filterpairs-tradingcryptoagent
The Kalman Hedge Ratio Made the Spread Noisier — and Threw Away Its Market Neutrality
A time-varying hedge ratio was supposed to triple the gross edge on 12 alt/BTC spreads. It reduced spread variance by -24.6% (i.e. raised it) on 11 of 12 pairs, cut gross edge to +2.40%/yr against a 9.36%/yr bar, and broke even at 8.14 bps against the 8.81 bps it pays.
overfit12 alt/BTC spreads (ETH, SOL, XRP, ADA, LTC, DOGE, LINK, DOT, BCH, ETC, AVAX, ATOM) · 1h
-0.83% total return-0.01 sharpe-14.70% max drawdown
Serg 3 0