Financial Analysis - Build a ChatGPT Pairs Trading Bot - Benchmark Against Buy-and-Hold

The video tutorial discusses the evaluation of trading algorithms by comparing them to a buy and hold strategy. It emphasizes the importance of plotting asset prices and computing cumulative log returns to assess performance. The tutorial analyzes the algorithm's performance, highlighting its variance and risk, especially during the COVID-19 pandemic. Various scenarios and timeframes, including pre- and post-pandemic periods, are tested using assets like Microsoft and Apple. The analysis shows that while the algorithm may reduce risk, it often underperforms compared to buy and hold, especially in volatile markets.

What factors does the teacher mention that could affect the performance of the trading algorithm?

How does the trading strategy perform when tested with Microsoft and Apple from 2018 to 2021?

What conclusion can be drawn about the trading strategy's performance compared to the buy and hold strategy?