Copula-based pairs trading improves profitability compared to buy-and-hold in Brazilian stocks, suggesting macroeconomic ties.
In this work, a copula‐based pairs‐trading strategy is proposed based on a new way of calculating the mispricing indicator. Its performance is evaluated on selected equities in the Brazilian Stock Exchange Index (Ibovespa) and compared to a naive buy‐and‐hold strategy, and the original indicator is applied to copula‐based pairs trading. Additionally, the relationship between the strategies' profitability and key macroeconomic variables is assessed. The results indicate that the copula‐based pairs‐trading strategy is statistically superior to the buy‐and‐hold strategy in terms of profitability and risk. Last, although macroeconomic variables are associated with Ibovespa performance, they are neutral in relation to performance with the pairs‐trading strategy.
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Salgado et al. (2025) studied this question.
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