Statistical arbitrage
A set of simultaneous positions, each risky on its own, built together on a persistent statistical deviation rather than on a riskless price difference.
How to read the number
What separates it from true arbitrage is the nature of the payoff: it exists on average across many positions and is guaranteed in none of them.
When the metric lies
A pattern found by search often lives only inside the sample. Similar strategies also unwind at the same moment, and there is not enough liquidity for all of them at once.
Also known as: stat arb