BTC-ETH Daily Engle-Granger Cointegration Residual Mean Reversion Pairs Trade with 90-Day Rolling Window

A dollar-neutral, daily-bar pairs trading strategy on BTCUSDT.BINANCE and ETHUSDT.BINANCE perpetual futures using PROPER ENGLE-GRANGER COINTEGRATION (not the failed 4H log-ratio z-score). This directly addresses the analyst's explicit recommendation from a prior failure log entry: 'Daily-bar pairs trades with longer lookbacks (60-120 days) have shown more durable cointegration in academic crypto literature than 4H/30-bar versions. A future hypothesis proposing daily-bar pairs with cointegration-based signals (Engle-Granger residual mean reversion) would be structurally distinct and worth a fresh attempt.' The mechanism (Engle 1987, Engle-Granger 1987 Nobel-prize-cited): (1) on each daily bar close, run a rolling 90-day OLS regression of ETH_close vs BTC_close to estimate the time-varying hedge ratio β; (2) compute the RESIDUAL series ε[t] = ETH[t] - β × BTC[t] over the last 90 days; (3) z-score the latest residual against its 90-day mean and std; (4) when z > +2 (ETH richly valued vs BTC), go SHORT ETH + LONG BTC (sized by current β to be dollar-neutral on the regression-adjusted spread); when z < -2, go LONG ETH + SHORT BTC. Hold until |z| < 0.5 (reversion confirmed) or max 21 days. Critically different from the failed 4H ratio z-score: (a) Engle-Granger ESTIMATES the hedge ratio dynamically rather than assuming a fixed 1:1 ratio — this handles the documented 2022-2025 ETH-BTC decoupling because β itself rebases as cointegration weakens; (b) DAILY bars give the 90-day rolling regression sufficient observations (90 vs 30 in the 4H/30-bar failure) for statistical power; (c) the longer cointegration window matches the timescale at which crypto majors actually mean-revert (multi-week, not multi-hour). Uses ONLY BINANCE USD-M perp daily bars — no supplementary data, no spot, no options. Avoids EVERY confirmed failure mode. Fills FOUR under-represented buckets: long-short direction (14.6% → toward 45%), pairs scope (extends 18.6% pairs category), proven-academic mechanism, and OHLCV-only data dependency. Position sizing: 15% per leg, with the leg sizes adjusted by β to be dollar-neutral on the spread (not on the individual instruments). Risk per trade: 1.5% of equity capped by hard stop.