Statistics used
Basic Statistics is very useful in developing a trading algorithm. Some of the most widely used functions are as follows
- Mean
- Standard Deviation
- Skewness
- Correlation
Lets study the functions one by one.
Mean
Simply returns the sum of parameters divided by the number of parameters
Syntax:mean(parameter,n)
Standard Deviation
Gives an idea about the movement in the parameters. Higher the value, more is the combined upward and downward movement
Syntax:std(parameter,n)
Skewness
Gives some information about how unsymmetrical have the values of the parameter have been. A positive value means that more parameters are higher than the mean and vice versa.
Syntax:skew(parameter,n)
Correlation
Gives an idea on how to different parameters are changing their value in synchronization, i.e. a high correlation means that parameters are changes in an almost same way and a negative correlation indicates opposite changes in the parameters.
Syntax:corr(parameter1,parameter2,n)
