Residual Z-Score compares two markets with a rolling OLS hedge on log prices: (\log A = \alpha + \beta \log B). It z-scores the latest residual over a trailing window and mean-reverts: buy when residual z ≤ −threshold, sell when ≥ +threshold.
Market B (symbolB) is required. Market A defaults to the strategy primary symbol (same dual-market hydration pattern as Correlation threshold).
This is richer than a simple price-ratio z on Pairs Spread, but it is not a full cointegration / half-life test—just a rolling residual extreme.
When to use it
- Fade when an alt is rich or cheap vs BTC (or another ref)
- Relative-value entries without building a multi-leg pairs book
- As a filter: only allow pending sides that match the residual fire
What you’ll set in the app
- Market A / B — symbol, optional exchange and timeframe (empty A fields use the strategy primary)
- OLS window — bars for α, β (default 60)
- Residual z window — trailing residual sample for the z-score (default 20; must be ≤ OLS window)
- Z threshold — magnitude that triggers buy/sell (default 2)
Missing pair series, warm-up, or a degenerate OLS fit → no signal.
Tips
- Start with B = BTCUSDT when trading other USDT perps on the same exchange.
- Residual z ≠ correlation: use Correlation threshold when you care about co-movement strength, not hedge residual.
- Invert flips buy/sell (or the filter agreement side).