Autocorrelation Serial Correlation

• Correlation of time-series with a lagged copy of itself

• same series, but lagged by a day (lag-one correlation)

Mean Reversion

• negative autocorrelation

Momentum/Trend Following

• positive autocorrelation

Computing autocorrelations:

# Convert index to datetime
df.index= pd.to_datetime(df.index)

# Downsample from daily to monthly data
df = df.resample(rule="M", how="last")
# rule: frequency (M is monthly)
# how: how to do resampling (first, last, average date of period)

df['Return'] = df['Price'].pct_change()
autocorrelation = df['Return'].autocorr()