Pairs Trading Calculator

How it works

What this page does

Pairs trading bets that two related instruments, which usually move together, will snap back toward their normal relationship after they drift apart. You go long one leg and short the other, so broad market direction roughly cancels and you trade the spread between them. This page has a live scanner plus three manual calculators.

The live scanner

Pick an anchor — the instrument you actually want to trade — and how many lots or shares you intend to put on it. The scanner pulls daily prices for a basket of major FX pairs, metals, energy, indices, big tech stocks and BTC, then for each pairing it estimates the hedge ratio, the spread, its z-score, the rolling correlation, the mean-reversion half-life, and the size for the other leg. Every row carries an honest relationship badge:

• ✅ real pair — cointegration confirmed and the half-life is in a tradeable band, so the spread has historically mean-reverted (there is an edge to trade).
• ⚠️ weak — the two are correlated but cointegration did not pass or the spread reverts too slowly; size small and lean on discipline.
• ❌ none — correlation is too weak; the numbers only balance the legs mechanically, there is no spread edge to harvest.

Zero ✅ rows is normal — genuine cointegration is rare and fragile. The scanner reads delayed Yahoo daily data cached on our server (refreshed hourly); it is research, not a trade signal, and connects to no account.

1 · Hedge ratio & spread

The hedge ratio β sets how much of leg B you short per dollar of leg A. With β = 1 the two legs carry equal dollar notional — dollar-neutral. Short shares of B come from β × (shares_A × price_A) / price_B, and the price spread shown is A − β·B. The scanner's spread is the log version, ln(A) − β·ln(B) − intercept, fitted by an Engle–Granger cointegration regression.

2 · Spread z-score & signal

The z-score says how far today's spread sits from its recent average, in standard deviations: z = (spread − mean) / std. The bigger the absolute value, the more stretched the pair. A common rule enters when |z| crosses a threshold (2.0σ for the cleanest pairs, higher for weaker ones) and flattens once it falls back inside ±0.5σ. A positive z means the spread is rich (short it); negative means cheap (long it).

3 · Two-leg position split

Given the capital you want deployed gross, it splits across the two legs at the β notional ratio: A notional = capital / (1 + β) and B notional = capital × β / (1 + β), then converts each to a share or lot count at the prices you enter. At β = 1 the split is even and market-neutral.

What it deliberately does not do

It will not promise the spread reverts — cointegration breaks, especially around earnings or regime shifts, and after costs the edge in pairs trading is thin. Lot and contract sizes are estimates; the robust outputs are the ratio and the spread statistics, not a share count down to the decimal. This is an information tool for education, not investment advice.