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USO/GLD (Oil/Gold) Pairs Trading Algo using real price of Gold

This is an update of Justin Lent’s original GLD/USO pairs trading algorithm taken from Ernie Chan’s book, Algorithmic Trading. Pairs Trading is a market-neutral type of trading strategy that waits for an irregularity in the correlation between two highly correlated securities, and then goes short on the over-performer and long on the under-performer. A full tutorial on Pairs Trading is available through the Quantopian Lecture series.

Different from the original backtest, this algorithm uses the price of gold from Quandl to calculate spreads rather than the GLD ETF. However, in both algorithms, the GLD ETF is used to hold positions in gold. You can find more datasets like VIX, macroeconomic indicators, news & social media sentiment, and more on Quantopian Data.

A quick note on the backtest date periods: USO/GLD is a good mechanical pair but is not a profitable trade. However this algo should be able to serve as a template to test other interesting pairs trades - would love to see others post suggestions!

Other Quandl Data Examples:

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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: 56ccd0806389270de4051879
We have migrated this algorithm to work with a new version of the Quantopian API. The code is different than the original version, but the investment rationale of the algorithm has not changed. We've put everything you need to know here on one page.
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1 response

Ya, def not a good pair. Just doing a current 1-year backtest, this also gets crushed.