Now that we’ve gotten our data, let’s add these stocks to our
newDF and create their spread.
#adding dltr and dg to our newDF dataframe
#creating the dltr and dg spread as a column in our newDF dataframe
We’ve now added the DLTR and DG stocks as well as their spread to our newDF dataframe. Let’s take a quick look at our dataframe.
Now that we have Spread_2 or the spread of DLTR and DG, we can create ADF2 or a second ADF test for these two stocks.
#Creating another adfuller instance
We’ve just run the ADF test on our DLTR and DG spread. We can now repeat our earlier logic to determine if the spread yields a tradable relationship.
if adf2 < adf2[‘1%’]:
print(‘Spread is Cointegrated at 1% Significance Level’)
elif adf2 < adf2[‘5%’]:
print(‘Spread is Cointegrated at 5% Significance Level’)
elif adf2 < adf2[‘10%’]:
print(‘Spread is Cointegrated at 10% Significance Level’)
print(‘Spread is not Cointegrated’)
Stay tuned -for the next installment in this series. Lamarcus will demonstrate how to
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