Cointegration Analysis

Cointegration testing identifies pairs of assets that share a long-run equilibrium relationship, enabling statistical arbitrage and pairs trading strategies.

What Is Cointegration?

Two price series are cointegrated when they are individually non-stationary (random walks) but a linear combination of them is stationary (mean-reverting). Intuitively, the prices may wander apart temporarily but are pulled back to an equilibrium spread over time.

Cointegration vs Correlation