Financial Analysis - Build a ChatGPT Pairs Trading Bot - More about Log Returns (Optional)

The video tutorial explains the concept of returns and log returns, highlighting why log returns are approximately equal to simple returns. It uses the first-order Taylor expansion to demonstrate this approximation. The tutorial also covers the calculation of log returns in code, explaining the process of shifting asset prices and computing element-wise log returns.

What does it mean when the lecture states that 'this is approximately correct'?

How does the log return calculation relate to the portfolio returns?

Why is it important to shift the asset prices when calculating returns?