Mean Reversion Half-Life from AR(1) Calculator

Estimate the mean reversion half-life of a time series from its AR(1) coefficient. Half-life = -ln(2) / ln(rho), where rho is the lag-1 autocorrelation. Used for pairs trading and spread trading.

Principal ($)
Annual Rate (%)
Years
Compounding / Year
$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.
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How It Works

Estimate the mean reversion half-life of a time series from its AR(1) coefficient. Half-life = -ln(2) / ln(rho), where rho is the lag-1 autocorrelation. Used for pairs trading and spread trading

Each component has a specific meaning:

  • Its AR coefficient — The its ar coefficient recorded for the scenario being assessed.

Note: Interpret the mean reversion half-life result against the thresholds and context described above.

How to Use

Enter the its AR coefficient for the scenario you are assessing. Estimate the mean reversion half-life of a time series from its AR(1) coefficient. Half-life = -ln(2) / ln(rho), where rho is the lag-1 autocorrelation. Used for pairs trading and spread trading. Use the mean reversion half-life result to inform your calculation.

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Frequently Asked Questions