Research On Paired Transaction Portfolio Strategy Based On Co-integration And Distance Method

Looking back at the 2018 A-share market,the three major stock indexes of the Shanghai Stock Exchange,Shenzhen Composite Index and the Growth Enterprise Market fell by-24.59%,-34.42% and-28.65%,respectively,due to the impact of the trade war.With the economic downturn and increased supervision,the original investors can obtain more stable assets in the securities market,and the investors are increasingly expecting a stable investment plan.Therefore,the pairing trading strategy has returned to the investor's field of vision.in.Paired trading is one of the widely used statistical arbitrage strategies and is also a market neutral strategy.The paired trading strategy is to avoid the systemic risk of investment by constructing the long position of the stock pair and gaining from the expansion of the stock spread to the convergence.Even if the market as a whole goes down,it can still get stable returns.This paper takes the Shanghai 50 index as the object of study,and selects the co-integration method and the minimum distance method as the methods of stock paird in the paired trading strategy.In paird trading strategy in the process of scheme design,use of stock paird method based on the cointegration and stock paird method based on distance,respectively,in accordance with the cointegration test p values,and the size of the distance value as a screening paird stock index,and selected pairs stock according to the p value,and the size of the distance,sorting(since),choose the filtering rules before 10,20 to 30 for paird stock to build portfolios,compared to two kinds of methods of constructing portfolio returns.By comparing the arbitrage of the portfolio under the two methods,the following conclusions can be drawn: 1.In the Chinese A-share market,the paired trading strategy based on the cointegration-based stock pairing method and the distance-based stock pairing method can still obtain positive The income shows that the two strategies are effective and profitable in the Chinese A-share market.2.In terms of winning percentage,the winning ratios of the portfolios constructed usingthe distance-based stock pairing method are higher than those obtained by using the portfolio based on the cointegration stock paird method.3.When the number of stock pairs in the portfolio is small,using a coin pairing method based on cointegration to construct a stock portfolio achieves better yield performance;when there are more stock pairs in the portfolio,a distance-based stock pairing method is used.Building a portfolio has resulted in better earnings performance.