# Mean Reversion Strategy

Wikis > Quantitative Trading > Mean Reversion Strategy
Numerical Method’s mean reversion strategy is loosely inspired by the following papers.

Very briefly, a good mean reversion strategy depends on its ability to:

1. estimate the current true/hidden price (the mean) so that we can estimate the disequilibrium
2. manage the risk by keep the “optimal” position based on the disequilibrium

## Synthetic Assets

In practice, most single assets do not naturally exhibit mean reversion behavior (except maybe over a short horizon). We would thus have to create synthetic assets that mean revert. For example,

$Z = X - \beta * Y$

One good starting point is cointegration. However, the cointegration criterion, namely stationarity, is a very restrictive concept. It is very difficult to achieve practically. For the sake of making money, this is also unnecessary. What we really need is a concept of “close enough to stationarity so that we can make money”.