Machine Learning for ESG Stock Trading: PCA and Clustering

Introduction

In developing a Pairs Trading strategy, finding valid, eligible pairs that exhibit unconditional mean-reverting behavior is of critical importance. We walk through an example implementation of finding eligible pairs and then perform a backtest on a selected pair. We show how popular algorithms from Machine Learning can help us navigate a very high-dimensional search space to find tradable pairs.

Jupyter Notebooks are available on Google Colab and Github.