Correlation calculator
How closely two markets move together.
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Pair trading calculator
How stretched the spread between two related markets is, and how to balance the two legs.
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- Free
- No sign-up
- Nothing you type is stored
The two markets
The spread
The spread's z-score is -0.76: the spread is close to its average.
- Hedge ratio
- 0.73: a 1% move in the first has come with about 0.73% in the second. A pair of $10,000.00 in the second is balanced by about $7,268.79 in the first, on the other side.
- The spread
- One standard deviation is about 0.52% of value. Correlation of the prices: 0.94.
- Read it with care
- A z-score says how stretched the spread is against the days you typed, not that it will close. Pairs break when one company or market changes for good.
The last five days and the spread's z-score. The last day is marked.
| Day | First | Second | Z-score |
|---|---|---|---|
| 17 | 99.45 | 30.10 | +0.87 |
| 18 | 97.70 | 29.68 | +0.65 |
| 19 | 96.80 | 29.52 | +0.90 |
| 20 | 100.71 | 30.45 | +1.33 |
| 21 | 101.73 | 30.34 | -0.76 |
Education only, not investment advice. The answer comes from the numbers you typed in, not from your account or the market. Simulated results are hypothetical and have limits: real trading has slippage, gaps, changing results and emotions. Trading leveraged products can lose money quickly, including all of it. Risk warning
Educational only, not financial advice; trading involves risk.
Trading the gap, not the direction
A pair trade buys one market and sells a related one in the right proportion, so it gains if the gap between them narrows, whichever way the market goes. The hedge ratio sets the proportion; the z-score says how far today's gap is from its average, in standard deviations.
A gap that is 2 standard deviations wide against a short history can widen further, and some pairs drift apart for good. Test the rule on years of prices and count the costs of both legs. Check how closely the two move with the correlation calculator, the gold and silver pair with the gold silver ratio, and the combined swing with the portfolio risk calculator.
Not advice. Arithmetic on the prices you type; a stretched spread can keep stretching.
Next tools
Gold silver ratio
Ounces of silver per ounce of gold, equal lots and a switch.
Portfolio risk calculator
How much a mix of holdings swings.
Pricing
Three ways in. Pick yours.
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Baroq never holds your money and never trades for you. Educational only, not financial advice; trading involves risk.