 is a class of quantitative trading strategies that exploit 

Unlike classical arbitrage (risk-free), statistical arbitrage:

Stat arb bets that prices will behave tomorrow like they did statistically in the past.

2. Core Assumptions Behind Statistical Arbitrage

Every stat arb strategy relies on at least one of these assumptions:

3. Statistical Arbitrage vs Classical Arbitrage

4. Major Types of Statistical Arbitrage Strategies

4.1 Pair Trading (The Foundation of Stat Arb)

Cointegration ensures long-term equilibrium.

Two series ( X_t, Y_t ) are cointegrated if:

Even if both series are non-stationary individually.

Economic relationships force prices back together over time.

Trade when futures deviate from fair value.

4.5 Cross-Sectional Statistical Arbitrage

Requires co-location, low-latency infra, and C++/FPGA.

4.8 Machine Learning Based Statistical Arbitrage