Many explanations of how and why cointegration works, and what makes it a powerful tool, serve the uninitiated poorly. Forests of algebra do not make for approachability.
Worse, the links between cointegration and tradability are often assumed to be part of a reader’s knowledge – and that is when it is not being rashly implied that cointegration = tradablility and is thus enough to transact upon.
So we have put together this Quick Guide: Principles & Practicalities to sketch out in simple terms the mechanics behind good potential trades. It focuses on situations where the pre-requisite of cointegration has already been established by ArbMakerPlus and helps answer the question “Now what?”