Do i do a long/long or short/short of the trading pair when they have a negative cointegration coefficient?
pbk
A pair of stock that I have been trading has a negative cointegration coefficient (Beta) that is statistically significant. When i want to long a spread, according to the spread equation below, I should long both stockA and stockB (vice versa for short spread). This pair has strong positive correlations that is statistically significant as well. The spread is stationary and hurst exponent is < 0.5. Backtest shows the strategy is profitable and I traded it live once by longing the spread (long St