The rules
Z-score of log(KO) minus log(PEP) over 60 days: above +2 short KO and buy PEP, below -2 the reverse; close when the z-score is back inside 0.5.
- Universe
- KO and PEP
- Bars
- daily
- Position size
- 50% long / 50% short
- Rebalance
- daily
Results
| Measure | Orbital re-test | Published | SPY, same days |
|---|---|---|---|
| Window | Not re-tested | 2000-2025 | — |
| Total return | — | +48.83% | — |
| CAGR | — | +1.54% | — |
| Sharpe | — | −0.05 | — |
| Discounted Sharpe | — | — | — |
| Max drawdown | — | −23.6% | — |
| Win rate | — | 49.1% | — |
| Profit factor | — | 1.14 | — |
| Trades | — | — | — |
Rebuild it in Orbital
Paste this into Orbital Chat. The Strategy Developer builds the workflow and asks before it runs any backtest.
Closest Orbital version: a pairs trade needs both prices in one decision, so each stock trades its own 60-day z-score instead of the spread between them. That makes it single-stock mean reversion, long and short, and no longer market neutral.
Trade KO and PEP on daily bars, each stock on its own. Each day, measure its 60-day z-score: how many standard deviations the close is above or below its 60-day average. Short a stock with 50% of equity when its z-score is above +2, and buy it with 50% of equity when its z-score is below -2. Cover a short when the z-score falls back below +0.5, and sell a long when it rises back above -0.5. Long and short; use a margin account for the shorts. Backtest the last 10 years with $100,000.
Why it was not re-tested
A pairs trade needs both prices in one decision. An Orbital strategy decides each symbol on its own bars.
Sources