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pair trading BABA vs YHOO

I am trying to catch the moment when zscore > or <-4. Then stop all the trading, wait until these two stocks finally converged or profit reaches 10%, clear all the positions. Redo it again when zscore >4.
Could someone fixes the code for me please? Thanks a lot!

Clone Algorithm
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Backtest from to with initial capital
Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 5644327a31822e11177c1209
There was a runtime error.
2 responses

You're headed in the right direction. To help you out:

I am trying to catch the moment when zscore > or <-4.

Then stop all the trading,

wait until these two stocks finally converged or profit reaches 10%, clear all the positions.

  • Check the profit using context.portfolio.pnl
  • Close the positions by doing order_target(stock, 0)

Redo it again when zscore >4.

  • this will get triggered in your trading logic, since len(context.portfolio.positions) is now 0
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Put any initialization logic here. The context object will be passed to

the other methods in your algorithm.

def initialize(context):
context.stock1 = sid(14848)
context.stock2 = sid(47740)

Will be called on every trade event for the securities you specify.

def handle_data(context, data):
deviation = data[context.stock1].stddev(30)

if(deviation != None):  
    mean = data[context.stock1].mavg(30)  
    zscore = (data[context.stock1].price - mean) / deviation  

# for cash in context.portfolio.cash:
if context.portfolio.positions_value 4.0):
order_percent(context.stock1, -.5)
order_percent(context.stock2, .5)

    elif(zscore < -4.0) and context.portfolio.positions_value<1.1*context.portfolio.starting_cash:  
        order_percent(context.stock1, .5)  
        order_percent(context.stock2, -.5)  

def rebalance(context, data):

    elif context.portfolio.returns>1.1:  
        order_target(context.stock1, 0)  
        order_target(context.stock2, 0)  

elif(zscore > -4.0 or zscore < 4.0):

reduce_position(context.stock1, context.portfolio, all)

# reduce_position(context.stock1, context.portfolio, all)
# log.info("Positions reduced")

def reduce_position(stock, portfolio, abs_quantity):
"""
decrease exposure, regardless of position long/short.
buy for a short position, sell for a long.
"""
pos_amount = portfolio.positions[stock].amount
if pos_amount > 0:
order(stock, -1 * abs_quantity)
elif pos_amount < 0:
order(stock, abs_quantity)

I just fix the code. But the algo does not close the position. Do you know why? Thank you!