Pairs trading EUR/USD × GBP/USD: why it cannot be reproduced
Methodology
- The hypothesis requires synchronous quotes for two correlated instruments and an analysis of the stability of their link.
- The portal holds history for a single pair, EUR/USD — there is nowhere to take the second leg of the position from.
Why the hypothesis cannot be tested on our data
Pairs trading extracts profit from the relative movement of two correlated instruments. The available data is a single EUR/USD pair, so the spread of two pairs cannot be reproduced, and without it the hypothesis cannot be tested.
We deliberately give no figures here: a result computed on unsuitable data would be a fabrication. Blank space is more honest than a fake study.
Download the exact sample and run the logic yourself — the numbers above should match.
A Binance spot EUR/USDT proxy series, not a forex-broker feed. Binance Spot REST API (api.binance.com/api/v3/klines).
Conclusion
The hypothesis cannot be tested on our data: pairs trading by definition works with the ratio of two instruments, and a spread cannot be built from a single pair.
Practical takeaway for the trader
The main risk of pairs trading is a breakdown of the link between the instruments: the divergence stops reverting to the norm, and both legs of the position move into loss at once.
FAQ
Why can it not be tested on a single pair?
Pairs trading works with the ratio of two linked instruments. A spread cannot be built from a single pair, so the hypothesis cannot be tested.
What is the main risk of the approach?
A breakdown of the link: the divergence stops reverting to the norm, and the market-neutral position turns into a directional loss on both legs.
What would be needed?
Synchronous series for two pairs and an analysis of the stability of their link (cointegration).