Hi there
Why are there only few forex pairs that cointegrate well? I understand the lesson mentioned that economic fundamentals need to be similar, but I don't recall any restrictions on the number. I'd love to hear a few words here.
Many thanks
Alex
Hello Alex,
Few currency pairs are good candidate as few countries are similar fundamentally. For example, both Australia and Canada are commodity-driven. Similarly, you can find EUR and CHF etc which are decently cointegrated.
There is no restriction on number, we encourage you to find good pairs in currency markets