Hedge Ratio

Technical Analysis
1

Course Name: Mean Reversion Strategies In Python, Section No: 7, Unit No: 6, Unit type: Video



I think the Hedge Ratio should be params[1] and not as mentioned params[0] as it is the intercept.



Please correct me if I am wrong

2

Hi Jad



If you experiment with the code in the notebook in Section 7, Unit 11, you will see that the output of modelA.params is a pandas Series. Doing modelA.params[0] will return the value of this series, which in this case is treated as the hedge ratio. Hence, it should be 0 and not 1. 



Had there been a constant (intercept) in the equation, in that situation modelA.params[1] would have fetched the hedge ratio and modelA.params[0] would have fetched the intercept.

 

Hope this helps.