Pairs cointegration

Plain-language meaning

Cointegration identifies pairs of price series whose linear spread exhibits statistically stationary mean-reverting behavior.

Why it is useful

Pairs cointegration is useful as descriptive evidence when it is compared on the same definition, source, period, unit and exact listing. It is one input to research, not a verdict.

Where it appears in XMarketRadar

Look for Pairs cointegration in Portfolio Analytics, Risk Cockpit, holding analysis, performance views and relevant screeners.

How it is calculated or sourced

Two non-stationary price series X and Y are cointegrated if a linear combination Spread = Y − β×X is stationary (I(0)). Beta is estimated via ordinary least squares; stationarity is evaluated using the Augmented Dickey-Fuller (ADF) test on residuals.

Inputs, period and unit

Read the disclosed inputs or source, observation period, bar interval, unit, native currency and scale. A value without its source and as-of context is incomplete; unlike units must not be combined.

Worked example

Illustrative only: Stock A and Stock B have daily prices over 252 sessions. An OLS regression yields Hedge Ratio β = 1.65. The residual spread = Price(A) − 1.65 × Price(B) tests stationary with ADF t-stat −3.85 (p < 0.01). A spread divergence to z-score +2.4 indicates an extreme departure from historical equilibrium.

What high and low mean

A higher or lower Pairs cointegration value is descriptive, not automatically good or bad. Meaning depends on the instrument, comparison period, method and related evidence.

Positive, negative and genuine zero

Positive and negative Pairs cointegration values retain the definition shown here. A genuine reported or computed zero is displayed as 0 and is not the same as missing evidence.

When it is unavailable

Unavailable (—) means Pairs cointegration is absent, unsupported, stale under the screen's rules or not computable from verified inputs. It must never be converted to zero or a neutral signal.

Limitations and common mistakes

Cointegration relationships can break down unpredictably during structural shifts, earnings releases, corporate actions or sector regime changes. Past stationarity does not guarantee future mean reversion.

Market-specific differences

The concept is used across all supported markets, but currency, price scale, session calendar, source field and regulatory definition can differ. XMarketRadar preserves the exact exchange context.

Related terms

Use the related-term links on this page to compare Pairs cointegration with neighbouring definitions while retaining each term's distinct source, unit and limitations.

Suggested next steps

Open the related Portfolio and risk terms below, then follow the matching Help Centre task guide and inspect Pairs cointegration on an exact exchange listing. Confirm source, as-of time, units and unavailable reason before using it in research.

Educational information only; not investment advice or an order service.

This Pairs cointegration tutorial is educational and descriptive. It is not investment advice, a price prediction, a recommendation, or an instruction to buy, sell, rebalance or place an order.