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Medium · statistical_analysis · Quant Researcher interview question · cointegration, hedge_ratio, pairs_trading
Cointegration models the long-run statistical relationship between non-stationary time series, forming the basis of pairs trading strategies in quantitative finance. A hedge ratio is estimated using Ordinary Least Squares (OLS) to construct a stationary portfolio spread from two cointegrated assets. This problem involves calculating this hedge ratio and key diagnostics for the resulting spread. Task Implement the function cointegration_hedge_ratio(y: list, x: list) that estimates the hedge rati