BHEL - TATAPOWER Pair Analysis

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End-of-day divergence (Standardized residual) is 1.4.
Half life of pair is -36.8.
Real time (live) divergence is calculating using following formula:
[tatapower_price - (1.3 * bhel_price) - 0.428]/5.04

(where 0.428 is mean error and 5.04 is standard error)
Technical strength of BHEL is 2.9. (Support & Resistance)
Technical strength of TATAPOWER is 1.5. (Support & Resistance)
Recommendation
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Entry Criterion: Take positions when divergence becomes (+/-)1.5. And exit positions when divergence becomes (+/-)0.0.
Stop Loss: Put your stop loss when divergence becomes more than 2.5 or less than -2.5. We suggest you always use stop losses.
Note: When you trade in futures, keep in mind the expiry date of futures as divergence might not end before expiry date.
Click here to see all recommendations for pair bhel-tatapower.
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How to choose pairs?
Choose stocks from same sector/subsector.
Use stock with large market capitalization as first stock.

Charts

BHEL Futures - NSE
Expiry Date Close Price Open Interest Number of Trades No of Contracts Underlying Closing Price
February 27, 2020 33.9 55078400.0 3468.0 3468.0 33.9
March 26, 2020 33.9 48620000.0 2608.0 2608.0 33.9
April 30, 2020 34.05 1851200.0 39.0 39.0 33.9
Lot size: 10400.

TATAPOWER Futures - NSE

Expiry Date Close Price Open Interest Number of Trades No of Contracts Underlying Closing Price
February 27, 2020 51.75 56385000.0 3013.0 3013.0 51.7
March 26, 2020 51.95 27531000.0 3379.0 3379.0 51.7
April 30, 2020 52.7 189000.0 9.0 9.0 51.7
Lot size: 9000.
Click here for backtesting results.

BHEL-TATAPOWER Analysis with different time frames and thresholds

Time Frame 3months, Entry Threshold 1.5, Stop Loss Threshold 2.5, Total Profit 59523.456992
Time Frame 1month, Entry Threshold 1.5, Stop Loss Threshold 2, Total Profit 41033.1838579
Time Frame 1month, Entry Threshold 1.5, Stop Loss Threshold 2.5, Total Profit 24307.681776
Time Frame 3months, Entry Threshold 2, Stop Loss Threshold 3, Total Profit 20356.7931033
Time Frame 6months, Entry Threshold 2, Stop Loss Threshold 3, Total Profit 17077.4356708

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