{
"cells": [
{
"cell_type": "markdown",
"metadata": {},
"source": [
"# Rolling Regression\n",
"Author: Thomas Wiecki\n",
"\n",
"* [Pairs trading](https://www.quantopian.com/posts/pairs-trading-algorithm-1) is a famous technique in algorithmic trading that plays two stocks against each other.\n",
"* For this to work, stocks must be correlated (cointegrated).\n",
"* One common example is the price of gold (GLD) and the price of gold mining operations (GFI)."
]
},
{
"cell_type": "code",
"execution_count": 1,
"metadata": {
"collapsed": true
},
"outputs": [],
"source": [
"%matplotlib inline\n",
"import pandas as pd\n",
"import numpy as np\n",
"import pymc3 as pm\n",
"import matplotlib.pyplot as plt"
]
},
{
"cell_type": "markdown",
"metadata": {},
"source": [
"Lets load the prices of GFI and GLD."
]
},
{
"cell_type": "code",
"execution_count": 14,
"metadata": {},
"outputs": [
{
"data": {
"text/html": [
"\n",
"\n",
"
\n",
" \n",
" \n",
" | \n",
" GFI | \n",
" GLD | \n",
"
\n",
" \n",
" | Date | \n",
" | \n",
" | \n",
"
\n",
" \n",
" \n",
" \n",
" | 2010-01-04 | \n",
" 13.55 | \n",
" 109.82 | \n",
"
\n",
" \n",
" | 2010-01-05 | \n",
" 13.51 | \n",
" 109.88 | \n",
"
\n",
" \n",
" | 2010-01-06 | \n",
" 13.70 | \n",
" 110.71 | \n",
"
\n",
" \n",
" | 2010-01-07 | \n",
" 13.63 | \n",
" 111.07 | \n",
"
\n",
" \n",
" | 2010-01-08 | \n",
" 13.72 | \n",
" 111.52 | \n",
"
\n",
" \n",
"
\n",
"