Qn. 1 / 7

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What is the primary focus when analyzing potential pairs for pair trading?

"Beta of the pair"

"Intercept of the regression"

"Residuals from the regression"

"Standard error of the regression"

Qn. 2 / 7

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What does it mean for two time series to be co-integrated?

"They have a high correlation"

"They have similar volatility"

"They move together over time"

"They are both stationary"

Qn. 3 / 7

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How can you determine if two stocks are suitable for pair trading?

"By comparing their historical prices"

"By analyzing their fundamental data"

"By checking if their residuals are stationary"

"By calculating their correlation coefficient"

Qn. 4 / 7

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What statistical test is used to check for stationarity in a time series?

"T-test"

"Chi-square test"

"Augmented Dickey-Fuller (ADF) test"

"F-test"

Qn. 5 / 7

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What is the significance of the p-value in an ADF test for pair trading?

"It indicates the strength of the correlation between the stocks"

"It represents the probability of the residuals being non-stationary"

"It measures the error ratio of the regression"

"It determines the optimal trading strategy for the pair"

Qn. 6 / 7

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What are the three conditions that define a stationary time series?

"Constant mean, constant standard deviation, and no autocorrelation"

"Increasing mean, decreasing standard deviation, and high autocorrelation"

"Fluctuating mean, constant standard deviation, and no autocorrelation"

"Constant mean, increasing standard deviation, and high autocorrelation"

Qn. 7 / 7

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What is the ideal p-value threshold for considering a time series stationary in pair trading?

"0.10 (10%) or lower"

"0.05 (5%) or lower"

"0.50 (50%) or lower"

"1.00 (100%) or lower"