Halliburton Rockwood Spread

  Yesterday we bought the spread $HAL-$ROC as part of our statistical strategy.  We thought we’d give a brief description of the main statistics we looked at before implementing this trade.

1. The $HAL-$ROC spread is cointegrated with at least a 90% confidence interval over both short term and long term time periods.
2. The spread is just over 2 standard deviations from the mean for the periods we look at.
3. The half life of the spread is under 50 days.  We don’t like to hold positions for long periods.
4. By just looking at the graph you can see that the spread didn’t make a significant gap to get to the entry point.  We worry when we see a big gap because it might indicate a change in the relationship.

Written by Norm Winer. Follow me on Twitter and StockTwits.
hal roc 8 29 2011