{"id":2091413,"date":"2018-11-06T11:47:33","date_gmt":"2018-11-06T06:17:33","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=2091413"},"modified":"2018-11-06T11:47:33","modified_gmt":"2018-11-06T06:17:33","slug":"usdinr-and-dollar-indices-part-iv","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2018\/11\/06\/usdinr-and-dollar-indices-part-iv\/","title":{"rendered":"USDINR and Dollar Indices, Part IV"},"content":{"rendered":"

Please read Part I<\/a> for the introduction, Part II<\/a> for a study of the spread between USDINR and the dollar indices and Part III<\/a> for a spread-trading back-test on daily returns.<\/em><\/small><\/p>\n

Weekly vs. Daily<\/h3>\n

In our previous posts, we used daily returns to setup the analysis. However, analyzing daily series on currencies and commodities is problematic. They trade 24\/7 in a global marketplace and “closing” prices for commodities and currencies are hard to pin down at a granular level across markets. One way to ameliorate this issue is to use a weekly or a monthly series instead.<\/p>\n

Here are the plots of the spreads and p-values from the adf-tests applied to weekly returns:
\n\"USDINR.DTWEXB<\/a>
\n\"USDINR.DTWEXM<\/a>
\n\"USDINR.DTWEXO<\/a><\/p>\n

The back-test results mirror that of the daily series, with bets on momentum carrying through on the USDINR and DTWEXM pairs:
\n\"USDINR<\/a><\/p>\n

This gives us more confidence in our back-tests. We end our series with the following caveats:<\/p>\n

    \n
  1. Trading the spread involves trading both legs (as discussed in Part III.)<\/li>\n
  2. One can only buy a currency by selling another. i.e., buying USDINR implies going long USD and short INR.<\/li>\n
  3. Using the above analysis, if a trade involves buying USDINR in one of the legs, it does not inform anything on relative valuation of USD or INR.<\/li>\n<\/ol>\n

    Code and charts on github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Please read Part I for the introduction, Part II for a study of the spread between USDINR and the dollar indices and Part III for a spread-trading back-test on daily returns. Weekly vs. Daily In our previous posts, we used daily returns to setup the analysis. However, analyzing daily series on currencies and commodities is … <\/p>\n","protected":false},"author":2,"featured_media":2091073,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[2761,2721],"class_list":["post-2091413","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-quant","tag-usdinr","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2091413","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=2091413"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2091413\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2091073"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=2091413"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=2091413"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=2091413"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}