Cointegration suggests a long-term equilibrium relationship between the prices of stock pairs.
Studying how to make profit from two correlated stocks
Example: Coca Cola and PepsiCo
from statsmodels.tsa.stattools import coint # use this library to find this out the p_value
Arbitrage
Cross-trading between two stocks, no additional investment
Little to no risk, positive profit, quickly disappears
Signals based on z score from rolling mean and std
Assumption that the stocks will follow movement with each other
Increasing trade frequency (decreasing time range) when z-score is extremely high