Statistical arbitrage is a quantitative trading strategy that involves using statistical analysis and mathematical models to identify and exploit pricing discrepancies in financial markets. The goal of statistical arbitrage is to generate profits by buying undervalued assets and selling overvalued assets in order to take advantage of temporary price differences.
The strategy typically involves identifying two or more securities that are expected to move in tandem based on statistical analysis of historical price data. The trader then places simultaneous long and short positions on these securities, with the expectation that the undervalued asset will increase in value while the overvalued asset will decrease in value, resulting in a profit.
