PairScanner

Understanding the metrics

The vocabulary of pair trading, quant strategies and technical analysis, term by term. No prior knowledge required.

Last updated: October 9, 2026.

The scanner is built on cointegration: two securities whose prices, each unpredictable on its own, remain tied by a long-term equilibrium relationship. The gap to that equilibrium (the spread) then tends to revert to its mean, and that reversion is what the displayed signals are based on.

Cointegration

Engle-Granger test on five years of adjusted prices (in logarithm). “Yes” means the no-relationship hypothesis is rejected at the displayed threshold: the pair's spread has a statistically demonstrated restoring force.

P-value

Probability of observing such a stable spread if the two securities actually had no link. The lower it is, the more credible the cointegration. Usual threshold: 0.05.

Q-value (FDR)

P-value corrected for multiple testing (Benjamini-Hochberg procedure). Across thousands of tested pairs, some look cointegrated by pure chance: the q-value controls the expected share of false discoveries.

Z-score

Current position of the spread relative to its mean, in standard deviations (60-day rolling window by default). A Z of +2 means A is unusually expensive relative to B, a Z of -2 the opposite.

Live Z

Same computation as the Z-score, but using the latest intraday prices (quotes delayed by about 15 to 20 minutes) instead of the last close.

Signal

Directional reading of the Z-score beyond the threshold (2 by default): LONG A / SHORT B when the spread is abnormally low (buy A, sell B), SHORT A / LONG B when it is abnormally high. Beyond |Z| = 4 the relationship is considered possibly broken and the row is dimmed.

OOS p-val

Out-of-sample validation: the relationship is estimated on the first 70% of the history, then the spread's stationarity is tested (ADF) on the remaining 30%, never seen before. A low value indicates the relationship held outside the estimation period.

Reversion

Realized reversion rate: among historical signals where |Z| reached 2, the share that came back toward equilibrium (|Z| below 0.5) within the next 20 sessions. The number of events is shown in parentheses; a rate based on few signals is greyed out as unreliable.

Half-life

Average time needed for the spread's deviation from its mean to shrink by half, estimated with a mean-reversion model. The shorter it is, the faster a position unwinds.

Correlation

Correlation of the two securities' daily returns. Green if statistically significant, red otherwise. High correlation is not enough: only cointegration demonstrates a restoring force on prices.

Hedge

Hedge ratio (beta) estimated by regression: the number of units of B to trade for each unit of A in order to neutralize the spread.

20-session divergence

Performance gap between A and B over the last 20 sessions, expressed in standard deviations of its historical distribution. No hedge ratio, no long-term equilibrium: this is the correlation-and-divergence reading (one name takes off, its twin does not follow). It complements the spread Z-score, it does not replace it.

Beginner's explanation: over the last month of trading, one of the two securities pulled ahead of the other. This number tells you whether that lead is ordinary or exceptional compared with their shared history.

Common benchmarks, in absolute value:

Ratio (β = 1)

Raw ratio of the two prices, P(A) / P(B), tracked with the same ± 2σ bands as the spread. It is the most intuitive reading of pair trading; it assumes a hedge ratio of 1, whereas the scanner's spread estimates β by regression. When β is close to 1, both views tell the same story.

Beginner's explanation: simply divide A's price by B's price. When that number drifts far from its usual level, the gap between the two securities is unusual, and that is what its Z measures.

Common benchmarks, in absolute value:

Price A / Price B

Latest adjusted closes of the two securities (dividends and splits accounted for), as used in the spread computation.

Market beta (SPY)

Slope of a regression of the asset’s returns on SPY returns, with an intercept. Up to 252 shared returns, with at least 120 required. The calculation uses US closing prices in USD. R² measures the share of variance explained by SPY.

Beginner's explanation: This figure describes how closely the asset tended to follow the US market over the measured period.

Pair sensitivity

For weights +1 in A and −hedge in B: (beta A − hedge × beta B) / (1 + |hedge|). The denominator is gross notional. For two equal-dollar legs in opposite directions, the coefficient is (beta A − beta B) / 2. Reversing the trade reverses the sign. The 0.30 display threshold is a tool setting, not a statistical test.

Beginner's explanation: A figure near zero means the two legs offset part of their market-related moves. Other risks may remain.

SIC sector

Activity classification published by the SEC for the issuer. Pair Scanner groups stocks by the first two digits of their SIC code. Official descriptions remain in English. Codes refresh in the background; unknown codes are excluded by the Same SIC sector filter.

Beginner's explanation: The filter brings together companies from the same activity group. It does not tell you whether their prices will converge.

Cross-asset

A fixed selection of pairs across asset classes, tested with the same statistical functions and included in the multiple-testing correction. Both legs are quoted in USD and only shared dates are used. Their closing times may differ. Live Z is disabled across different exchanges.

Beginner's explanation: For example, gold can be compared with a fund of mining companies. An economic link motivates the comparison but does not validate the pair.

Success rate (pairs, no fees)

Share of past cases in the same group of pairs (same rule, same horizon) where the pair spread moved the signal's way, with no fees deducted. Measured on the most recent part of the history, which was not used to tune the rule, and shown with the number of cases (for example 120 of 207). Shown for pairs; the other strategies are presented as facts.

Beginner's explanation: out of all similar past cases, how many went the right way, before fees.

Common benchmarks, in absolute value:

Average move (pairs, no fees)

Average return of the same past cases, with no fees deducted, as a percentage of the amount committed across both legs of the pair.

Beginner's explanation: what the pair returned on average over similar past cases, before fees.

Change

A fact measured on today's data for five strategies: a stock's gap to what the market and its sector predicted (relative reversal); the biggest rises and falls over 5 sessions, with their rank (short-term reversal); the strongest gains over 12 months excluding the last month, for stocks and sectors (momentum); a stock's gap with its three statistical peers over 5 sessions (statistical peers); the last-session move of a leader and its follower (lead-lag). Gaps are expressed in standard deviations of their recent history.

Beginner's explanation: PairScanner describes what just happened and places it against what is usual. The trader decides whether to bet on a return to normal or on a continuation.

Common benchmarks, in absolute value:

Relative and short-term reversal

Two families of the multi-strategy scanner that spot an unusual recent move, unrelated to the pairs reversion rate above. Relative reversal: once the part explained by the market (SPY) and by its sector ETF is removed, the stock return deviates by more than two standard deviations of its recent gaps. Short-term reversal: among the 1,000 most liquid US stocks, PairScanner spots the 10 biggest falls and the 10 biggest rises over 5 sessions. Example: a stock drops 6% in one session while its sector is flat; if that drop exceeds two standard deviations of its recent gaps, PairScanner flags it. The trader decides whether to bet on a return to normal or on a continuation.

Correlation between assets

Correlation of the daily returns of two assets over the stated window (252 sessions for statistical peers). It measures shared moves, not an equilibrium relationship nor a causal order: two correlated securities can drift apart without ever coming back, and correlation does not say which one leads.

Beginner's explanation: two assets that often rise and fall together are correlated. That guarantees neither that a gap will close nor that one announces the other.

Common benchmarks, in absolute value:

Moving averages (50 and 200 sessions)

Average close over the last 50 and 200 sessions, recomputed every day. The stock above both averages, with the 50-session average rising, defines an uptrend; the opposite, a downtrend; otherwise, no clear trend.

Beginner's explanation: the smoothed price line over about two and a half months and ten months: it shows the underlying direction without the day-to-day noise.

Common benchmarks, in absolute value:

RSI (momentum)

Relative Strength Index over 14 sessions: ratio of the average rise to the average fall, scaled from 0 to 100.

Beginner's explanation: tells you whether the stock has risen or fallen a lot recently. Not a buy or sell signal in itself: a strong stock can stay above 70 for a long time.

Common benchmarks, in absolute value:

Volatility

Average daily move over 20 sessions and annualized volatility, compared with the periods of the past year (rank from 0 to 100%).

Beginner's explanation: tells you whether the stock moves more or less than usual.

Common benchmarks, in absolute value:

Relative volume

Last session's volume divided by the median of the previous 20 sessions; average volume of the last 5 sessions compared with the last 3 months.

Beginner's explanation: tells you whether many traders follow today's move.

Common benchmarks, in absolute value:

Support and resistance

Price zones found automatically: highs and lows that dominate five sessions on each side, grouped when they are within 1.5% of each other. Support is below the price, resistance above; the sheet gives the distance in percent and how many times the zone was touched.

Beginner's explanation: support is a zone where the stock often bounced, resistance a zone where it often stalled.

Trendline

A line joining two recent lows (support trendline) or two recent highs (resistance trendline), extended to the last session.

Beginner's explanation: shows the slope of a trend and where it would pass today.

Chart patterns

Shapes found by simple rules: one-year high or low, range breakout (leaving a narrow 20-session channel), double top or double bottom. Each pattern is described in one sentence, with the rule used.

Beginner's explanation: shapes analysts watch on charts; PairScanner finds and draws them for you.

Candlesticks

One session summed up in a candle: body between open and close, green if the close is higher, red otherwise; wicks up to the high and down to the low. Patterns found on the 1,000 most liquid stocks: doji, hammer, shooting star, bullish or bearish engulfing.

Beginner's explanation: each candle tells one day; some combinations signal that a move is running out of steam or turning.

Beta

Slope of the regression of the stock's daily returns on the market's (SPY), over one year.

Beginner's explanation: tells you how much the stock moves on average when the market moves 1%.

Common benchmarks, in absolute value:

Monte Carlo simulation

10,000 paths built by drawing random blocks of 5 sessions from the daily returns of the last 3 or 5 years (block bootstrap), over 1 month, 3 months or 1 year. Results: chance of ending higher, chance of losing more than 10%, 9-in-10 range (5% and 95% quantiles) and middle case (median). Same stock, same date: same result.

Beginner's explanation: thousands of possible futures drawn from the stock's history, to see the range of its moves. Not a forecast.

Past trend (simulation)

By default, the simulation removes the average return of the years used: it replays the stock's swings and volatility without extending its past rise or fall. The other option keeps that average return.

Beginner's explanation: without it, the simulation does not assume that a stock's sometimes exceptional past will continue.

Distance method: calculation and example

See these metrics on real pairs

Pair Scanner computes these numbers every day across more than 3,200 US securities. Access is free during the development phase: an email address is all you need.

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