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Model MeanReversionBasedOnSpreadQuantileDemo
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This quantitative model reference is provided for study, further research and application within the AlgoQuant framework. Read the research idea and implementation choices separately from the execution record.
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Robert J. Elliott, John van der Hoek and William P. Malcolm, Pairs trading (2005) treats the spread between related securities as an unobserved mean-reverting Gaussian Markov process measured with additional Gaussian noise. This separates a latent relative-value signal from noisy observations.
The paper's stated contribution is a model for estimating and tracking that spread and using it to motivate pairs-trading decisions. The intuition is to trade a deviation relative to an estimated equilibrium, rather than predict each stock's outright direction. The relationship can nevertheless break down, and spread convergence does not remove execution or financing risk.
This introduction is based on the original publisher abstract and author-institution record; full-text derivations were not available for review. The repository offers several signal customizations. Posterior-state, constant-coefficient and empirical-quantile rules must not be described as identical implementations of the paper.
MeanReversionBasedOnSpreadQuantile chooses thresholds from the configured spread distribution and is passed into Elliott2005Strategy by a Yahoo template. Coefficients define the traded spread; calibration controls the distribution used for thresholds. Re-estimation and execution assumptions determine the resulting backtest.
Runs a Elliott mean reversion strategy, coded up using a template.
Using this example. Chooses MeanReversionBasedOnSpreadQuantile as the customization of an Elliott2005Strategy inside a Yahoo simulation template. Quantile thresholds apply to the modeled spread, not each individual stock price. The report and chart reflect the template settings.
Model and publication. This is an Elliott-style spread strategy with a quantile-based customization. Quantile entry and exit rules are application choices, not a claim to reproduce the publication’s full estimator.
Implementation in this tutorial. MeanReversionBasedOnSpreadQuantile chooses thresholds from the configured spread distribution and is passed into Elliott2005Strategy by a Yahoo template. Coefficients define the traded spread; calibration controls the distribution used for thresholds. Re-estimation and execution assumptions determine the resulting backtest.
| Item | Value |
|---|---|
| Status | completed |
| Run | 39114360151 |
| UTC publication | 2026-10-18 11:43 UTC |
| Source commit | 355aa9242fc2a247b256aecc8406cbb409aa5ff3 |
| Data mode | original main defaults |
| Exit code | 0 |
| Elapsed seconds | 16.12 |
| Time limit seconds | 180 |
| Maximum Java heap | 1200m |
The original main returned successfully. Read the output and model assumptions before interpreting it.
Follow the repository setup for JDK 8, Maven credentials and an external NM license. From the repository root:
mvn -U -Dmaven.test.skip=true clean package
mvn exec:java -Dexec.mainClass=tech.nmfin.algoquant.demo.model.elliott2005.MeanReversionBasedOnSpreadQuantileDemoThe automated run uses scripts/ModelDemoRunner.java to initialize the external license before the unchanged main, save JFreeChart windows as PNGs, and exit after main returns. It uses an isolated working directory with the repository datasets/configuration linked in. Running directly may leave desktop windows open.
09:12:38.722 [main] INFO t.n.algoquant.util.config.AQConfig,194 - looking up configuration file: config.default.xml
09:12:38.725 [main] INFO t.n.algoquant.util.config.AQConfig,194 - looking up configuration file: config/config.default.xml
09:12:38.725 [main] INFO t.n.algoquant.util.config.AQConfig,209 - loading config file: file:/home/runner/work/algoquant-examples/algoquant-examples/target/model-results/MeanReversionBasedOnSpreadQuantileDemo/work/config/config.default.xml
09:12:38.888 [main] INFO t.n.algoquant.util.config.AQConfig,95 - current directory: /home/runner/work/algoquant-examples/algoquant-examples/target/model-results/MeanReversionBasedOnSpreadQuantileDemo/work
09:12:38.889 [main] INFO t.n.algoquant.util.config.AQConfig,169 - current config:
09:12:38.911 [main] INFO t.n.algoquant.util.config.AQConfig,11 - nm.license: /home/runner/work/algoquant-examples/algoquant-examples/license/nm.lic
09:12:38.911 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_FOLDER: ./test-data
09:12:38.911 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_GAINCAPITAL: ${DATA_FOLDER}/processed/gaincapital/extracted-from-raw-arrange-by-dates
09:12:38.911 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_BLOOMBERG: ${DATA_FOLDER}/processed/bloomberg
09:12:38.912 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_YAHOO: ${DATA_FOLDER}/yahoo
09:12:38.912 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_SGX: ${DATA_FOLDER}/raw/sgx
09:12:38.912 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_HOLIDAYS: ./log/holidays
09:12:38.916 [main] INFO t.n.algoquant.util.config.AQConfig,11 - DATA_COMPUSTAT_HK: ${DATA_FOLDER}/[database configuration redacted]/hk
09:12:38.916 [main] INFO t.n.algoquant.util.config.AQConfig,11 - PDF_OUTPUT_FOLDER: ./log/
09:12:38.916 [main] INFO t.n.algoquant.util.config.AQConfig,11 - PDF_PLOT_WIDTH: 800
09:12:38.917 [main] INFO t.n.algoquant.util.config.AQConfig,11 - PDF_PLOT_HEIGHT: 600
09:12:40.143 [main] INFO t.n.a.d.h.yahoo.YahooEODCacheFactory,237 - failed to load from file, reason: no data read from file; load from web
09:12:40.144 [main] INFO t.n.a.d.h.yahoo.YahooEODCacheFactory,196 - reading Yahoo! data for XOM from the Internet from 2012-01-01T00:00 to 2014-10-01T16:00
09:12:40.309 [main] INFO t.n.a.d.h.y.YahooEODCsvZipFileWriter,30 - writing csv.zip file ./log/Yahoo/XOM.csv.zip
09:12:40.342 [main] INFO t.n.a.d.h.y.YahooEODCsvZipFileWriter,81 - finished writing ./log/Yahoo/XOM.csv.zip
09:12:40.348 [main] INFO t.n.a.d.h.yahoo.YahooEODCacheFactory,237 - failed to load from file, reason: no data read from file; load from web
09:12:40.348 [main] INFO t.n.a.d.h.yahoo.YahooEODCacheFactory,196 - reading Yahoo! data for CVX from the Internet from 2012-01-01T00:00 to 2014-10-01T16:00
09:12:40.475 [main] INFO t.n.a.d.h.y.YahooEODCsvZipFileWriter,30 - writing csv.zip file ./log/Yahoo/CVX.csv.zip
09:12:40.491 [main] INFO t.n.a.d.h.y.YahooEODCsvZipFileWriter,81 - finished writing ./log/Yahoo/CVX.csv.zip
09:12:43.692 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2012-05-24T16:00: beta = [1.000000, -0.298163] , mu = 30.960872472495666, xt = 30.465368214399493, zt = 30.581309474104174
09:12:43.719 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2012-05-25T16:00: beta = [1.000000, -0.314951] , mu = 29.977713985551276, xt = 29.43809168753392, zt = 29.552083383161847
09:12:43.748 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2012-05-29T16:00: beta = [1.000000, -0.346518] , mu = 28.12047988859729, xt = 27.353929700445583, zt = 27.458729238936094
... excerpt shortened; complete stdout is in the release archive ...
09:12:46.029 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-11T16:00: beta = [1.000000, -0.149566] , mu = 49.718385563177236, xt = 47.99635892793512, zt = 48.56829517883433
09:12:46.036 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-12T16:00: beta = [1.000000, -0.137747] , mu = 50.619442390342456, xt = 48.721508466995566, zt = 49.37317916349528
09:12:46.040 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-13T16:00: beta = [1.000000, -0.197505] , mu = 46.11777946335587, xt = 44.39199893800619, zt = 45.15063918562845
09:12:46.041 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-14T16:00: beta = [1.000000, -0.226152] , mu = 43.967252123911514, xt = 42.247101103434765, zt = 43.058036871827696
09:12:46.048 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-15T16:00: beta = [1.000000, -0.190587] , mu = 46.65578586380425, xt = 45.03632274224485, zt = 45.68900817192053
09:12:46.055 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-18T16:00: beta = [1.000000, -0.201563] , mu = 45.821439852424525, xt = 44.3288212288717, zt = 45.130291492383385
09:12:46.060 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-20T16:00: beta = [1.000000, -0.144814] , mu = 50.08659005175859, xt = 48.68916171054319, zt = 49.44453153995957
09:12:46.075 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-08-29T16:00: beta = [1.000000, 0.192106] , mu = 75.79951019445639, xt = 74.72051173702879, zt = 75.3458312553501
09:12:46.085 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-09-02T16:00: beta = [1.000000, 0.261567] , mu = 81.08103995235022, xt = 79.06358912955702, zt = 79.86163060409328
09:12:46.086 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-09-03T16:00: beta = [1.000000, 0.196615] , mu = 76.14775626080356, xt = 74.30355939316699, zt = 75.29617921864707
09:12:46.088 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-09-04T16:00: beta = [1.000000, 0.205366] , mu = 76.7678314716818, xt = 74.4559285637645, zt = 75.38253821924562
09:12:46.093 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-09-05T16:00: beta = [1.000000, 0.128688] , mu = 70.93362975195869, xt = 69.0106474039234, zt = 70.13090572558875
09:12:46.129 [main] INFO t.n.a.m.m.e.s.Elliott2005Strategy,26 - recalibration of strategy @ 2014-09-30T16:00: beta = [1.000000, -0.458948] , mu = 24.52430704771692, xt = 23.89215819279785, zt = 24.193154538326432
09:12:46.223 [main] INFO t.n.a.d.m.e.MeanReversionBasedOnSpreadQuantileDemo,179 - Executions:
# Time Side Symbol Quantity Price
1 2012-05-29T16:00 BUY XOM 1.0 46.8350715637207
2 2012-06-19T16:00 SELL XOM 1.0 48.29276657104492
3 2012-06-20T16:00 SELL XOM 1.0 48.572879791259766
4 2012-06-21T16:00 BUY XOM 1.0 46.93795394897461
5 2012-07-10T16:00 BUY XOM 1.0 47.509613037109375
6 2012-07-11T16:00 SELL XOM 1.0 48.235595703125
7 2012-08-02T16:00 BUY XOM 1.0 49.093055725097656
8 2012-08-03T16:00 SELL XOM 1.0 50.047733306884766
9 2012-08-31T16:00 BUY XOM 1.0 50.2291145324707
10 2012-09-05T16:00 SELL XOM 1.0 50.24638748168945
11 2012-09-14T16:00 SELL XOM 1.0 53.105926513671875
12 2012-09-19T16:00 BUY XOM 1.0 52.11054992675781
13 2012-10-03T16:00 SELL XOM 1.0 52.760711669921875
14 2012-11-09T16:00 BUY XOM 1.0 50.49151611328125
15 2012-11-23T16:00 SELL XOM 1.0 51.579959869384766
16 2012-11-27T16:00 BUY XOM 1.0 50.57254409790039
17 2012-12-24T16:00 BUY XOM 1.0 50.32360076904297
18 2013-01-02T16:00 SELL XOM 1.0 51.35993957519531
19 2013-02-04T16:00 BUY XOM 1.0 51.61470031738281
20 2013-02-19T16:00 SELL XOM 1.0 52.04351806640625
21 2013-02-25T16:00 BUY XOM 1.0 51.099586486816406
22 2013-02-27T16:00 SELL XOM 1.0 52.16585159301758
23 2013-03-07T16:00 BUY XOM 1.0 51.68806838989258
24 2013-03-11T16:00 SELL XOM 1.0 51.95028305053711
25 2013-03-18T16:00 BUY XOM 1.0 51.723026275634766
26 2013-03-22T16:00 SELL XOM 1.0 52.026004791259766
27 2013-03-27T16:00 SELL XOM 1.0 52.777645111083984
28 2013-04-05T16:00 BUY XOM 1.0 51.86286544799805
29 2013-04-08T16:00 BUY XOM 1.0 51.62397766113281
30 2013-04-11T16:00 SELL XOM 1.0 51.9852294921875
31 2013-04-17T16:00 BUY XOM 1.0 50.15564727783203
32 2013-04-23T16:00 SELL XOM 1.0 52.031837463378906
33 2013-04-25T16:00 BUY XOM 1.0 51.31517791748047
34 2013-05-03T16:00 SELL XOM 1.0 52.45134735107422
35 2013-05-07T16:00 SELL XOM 1.0 53.109764099121094
36 2013-05-30T16:00 BUY XOM 1.0 54.028648376464844
37 2013-06-07T16:00 SELL XOM 1.0 53.653167724609375
38 2013-06-11T16:00 BUY XOM 1.0 53.072349548339844
39 2013-06-17T16:00 SELL XOM 1.0 53.68837356567383
40 2013-06-20T16:00 BUY XOM 1.0 52.24512481689453
41 2013-06-26T16:00 SELL XOM 1.0 52.68513870239258
42 2013-07-16T16:00 BUY XOM 1.0 54.73854446411133
43 2013-08-13T16:00 BUY XOM 1.0 52.8129768371582
44 2013-11-06T16:00 BUY CVX 1.0 70.3741226196289
45 2013-11-06T16:00 SELL XOM 2.0 55.069618225097656
46 2013-11-21T16:00 SELL CVX 1.0 72.32417297363281
47 2013-11-21T16:00 BUY XOM 1.0 56.31865692138672
48 2014-05-05T16:00 SELL XOM 1.0 61.64116287231445
49 2014-05-07T16:00 BUY XOM 1.0 61.760955810546875
50 2014-05-12T16:00 SELL XOM 1.0 61.649593353271484
51 2014-05-13T16:00 BUY XOM 1.0 61.72799301147461
52 2014-06-10T16:00 BUY XOM 1.0 61.185245513916016
53 2014-06-11T16:00 SELL XOM 1.0 61.4807243347168
54 2014-06-12T16:00 BUY XOM 1.0 61.30588150024414
55 2014-07-03T16:00 SELL XOM 1.0 61.86665725708008
56 2014-08-06T16:00 BUY XOM 1.0 59.689697265625
57 2014-08-29T16:00 SELL XOM 1.0 60.39698791503906
58 2014-09-04T16:00 BUY XOM 1.0 59.7289924621582
59 2014-09-05T16:00 SELL XOM 1.0 60.27553176879883
60 2014-09-30T16:00 BUY XOM 1.0 57.11176681518555
09:12:46.224 [main] INFO t.n.a.d.m.e.MeanReversionBasedOnSpreadQuantileDemo,185 - Performance Report:
Product Profit Loss Information Ratio For Zero Investment Omega For Periods Execution Count
CVX 1.9500503540039062 0.7071067811865476 Infinity 2.0
XOM 17.696189880371094 9.810782373657108 Infinity 58.0
Total 20.36886978149414 17.165154232006056 Infinity 60.0
Products and aggregate shown exactly as reported; P/L is monetary, not percent. Currency conventions belong to the demo.
Derived from stdout.log using the precision available in that file. Download plotted data. Undefined or malformed cells are omitted, never replaced by zero.
Parameter axes are separate. Record order is preserved; estimated parameters are not investment performance.
Derived from stdout.log using the precision available in that file. Download plotted data. Undefined or malformed cells are omitted, never replaced by zero.
Download MeanReversionBasedOnSpreadQuantileDemo.zip contains stdout, stderr, the execution record, checksums and any exported CSV/chart files.
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files/charts/chart-01.png |
142382 |
files/derived-charts/charts.json |
1026 |
files/derived-charts/derived-01.csv |
401 |
files/derived-charts/derived-01.png |
89065 |
files/derived-charts/derived-02.csv |
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files/derived-charts/derived-02.png |
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Read the reported units: optimizer weights, model-fit coefficients, forecast correlations and simulated P/L are different outputs. Synthetic runs demonstrate the API rather than historical market returns. Inspect undefined values and open positions instead of replacing them with zero. Chart exports visualize exactly this run.
For model assumptions, original publications and adaptation limits, use the literature guide.