Pairs Trading Matlab

[alecase 10]

Good morning everyone

I saw a pairs trading webinar on the topic and found this code.

I can not understand these two pieces of code, anyone is kind enough to explain

 

% The strategy:

% 1 Compute residuals over next N days

res = series2 (i: i + N-1, 1) ...

- (Reg1.coeff (1) + reg1.coeff (2). * Series2 (i: i + N-1, 2));

 

% 2 If the residuals are large and positive, then the first series

% Is Likely to decline vs. the second series. Short the first

% Series by a scaled number of shares and long the second series by

1% share. If the residuals are large and negative, do the

% Opposite.

 

indicated (i: i + N-1) = res / reg1.RMSE;

 

s (i: i + N-1, 2) = (res / reg1.RMSE> spread) ...

- (Res / reg1.RMSE <-spread);

s (i: i + N-1, 1) = -reg1.coeff (2). * s (i: i + N-1, 2);

end

end

 

Thank you very much for your cooperation

 

ps do you know where I can find some code on the pairs trading?