Co-Integration

Co-integration is a statistical property of a collection of time series variables that indicates a long-term equilibrium relationship between them. If two assets are co-integrated, their price spread is stationary, meaning it will revert to a mean over time even if the individual assets trend.

This is the mathematical foundation for pair trading and statistical arbitrage. Traders look for pairs of crypto assets that show strong co-integration to build market-neutral strategies that profit from the spread widening or narrowing.

Unlike correlation, which only measures short-term movement, co-integration confirms a durable structural relationship. It is essential for building sustainable long-term quantitative strategies.