Specialist track, course code SA
Statistical Arbitrage and Medium-Frequency Trading
Mean reversion trading over hours to weeks: pairs, baskets, cointegration and the risk of spreads that stop converging.
Medium-frequency trading holds positions for hours to weeks. It is fast enough that transaction costs dominate the result and slow enough that risk accumulates overnight. Statistical arbitrage is its classic form of mean reversion trading: buy what is cheap relative to something similar, sell what is dear, and wait for the gap to close.
What does the statistical arbitrage track cover?
Statistical Arbitrage covers residual returns, factor-neutral portfolios and signal decay. Pairs Trading and Mean Reversion covers pair selection, spread construction, entry and exit rules and the half-life of mean reversion. Cointegration Models for Spread Trading, at Researcher level, covers the Engle-Granger and Johansen procedures and what to do when a relationship breaks.
Where does this track lead?
To the Certificate in Statistical Arbitrage, which adds time series analysis and backtesting validation to the three spread-trading courses and ends in a capstone strategy tested out of sample.
Practitioner courses in this track
Lab-based courses. You build, test and cost real strategies and systems on market data.
- Pairs Trading and Mean Reversion The pairs trade from selection to testing: how to find candidate pairs, the distance and cointegration methods, hedge ratios, spread z-scores, trading rules, and the reasons pairs stop working.
- Statistical Arbitrage How statistical arbitrage strategies are built and tested: mean-reverting spreads, residuals from factor models, market-neutral portfolio construction, trading rules, transaction costs and the ways stat arb strategies decay.
Researcher courses in this track
Proof-level courses. Stochastic models, estimation theory and the literature behind each method.
Credentials that use this track
- Certificate in Statistical ArbitrageFive courses and a capstone on market-neutral trading: time series foundations, pairs and baskets, cointegration and the validation that keeps spread strategies honest.
- Professional Diploma in Algorithmic TradingThe top credential on the practitioner path. Eight courses and a 40-hour capstone covering everything between a trading idea and a book you could defend to a risk committee.
- Fellowship in Computational FinanceThe top credential on the researcher path. Nine courses, eight of them at researcher level, and a supervised dissertation, examined by two faculty members.
Questions applicants ask
What is the difference between pairs trading and statistical arbitrage?
Pairs trading bets on the spread between two related securities. Statistical arbitrage generalises the idea to many securities at once, usually with factor models and portfolio-level risk control.
Does statistical arbitrage still work?
Simple pairs on liquid stocks have been heavily traded since the 1990s and their returns have fallen. The courses teach the method, how crowding erodes it, and how to test whether a spread still pays after costs.