SPY / UPRO Pair as a Market Indicator

UPRO is the 3X SPY ultra bull ETF and many traders believe there is a simple leveraged advantage in trading UPRO in lieu of SPY....(assuming the direction of the markets is forecast correctly).
In fact, the relationship between SPY and UPRO is neither linear, geometric nor consistent and the 2 ETFs frequently display nuances of momentum and relative strength that appear to be at odds with one another.
Using the z-score algorithm that drives the Market Rewind/ MO2 Pairs Analyzer and detects and quantifies divergences in standard deviation cycles between two correlated inputs it is possible to create a trading model that capitalizes on periodic breaks in standard deviation thresholds (skew) and simultaneously goes both Long/Short  SPY/UPRO with a fixed time stop of 13 days.  This means that although the skew may continue for some time, the model will exit both sides of the position at 13 days.  At the same time, if the skew collapses prior to the 13 day time stop then the positions will be closed automatically.

The value of the time skew may change over time so to capture any potential volatility drift the N-Days value is recalculated each month. MO2's SPY/UPRO trade signals are vested 76% of the time. Trade results reflect returns of the pair over a 7 month period in order to align with M3 model performance metrics.