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Overview

The Bond Ratio Analyzer helps you identify opportunities for asset rotation by tracking the relative price relationship (ratio) between different bonds. When historically correlated bonds diverge in price, you can profit by selling the expensive one and buying the cheap one.
Core Strategy: Asset rotation exploits mean reversion in bond price relationships. When the ratio between two bonds deviates from its historical average, it may revert, creating profit opportunities.

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What is Asset Rotation?

Asset rotation (or ratio trading) involves:
  1. Selling the relatively expensive asset
  2. Buying the relatively cheap asset for the same total amount
  3. Waiting for ratio reversion
  4. Closing the position when the ratio normalizes
The goal: Profit from the relative price movement, regardless of whether the market goes up or down.

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How Bond Ratios Work

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Ratio Calculation

The ratio is simply one bond’s price divided by another’s: 
Ratio = Bond1.Price / Bond2.Price

// Example:
GD30.Price = $60,000
AL30.Price = $55,000
Ratio (GD30/AL30) = 60,000 / 55,000 = 1.0909 = 9.09%

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Understanding the Ratio

  • Ratio > historical average: Bond1 is relatively expensive
  • Ratio < historical average: Bond1 is relatively cheap
  • Ratio trend: Helps identify which asset is outperforming
The ratio itself doesn’t indicate absolute value—it only shows relative pricing between the two assets.

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Operation Workflow

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Opening a Ratio Position

1

Identify Ratio Divergence

Use TradingView or other charting tools to analyze the historical ratio. Identify when the current ratio significantly deviates from its mean.
2

Determine Expensive vs Cheap

If the ratio is high, Bond1 is relatively expensive. If low, Bond1 is relatively cheap.
3

Calculate Trade Size

Use ChuchoBot’s ratio calculator to determine the correct nominal amounts for equal peso values.
4

Execute Both Legs Simultaneously

Buy the cheap bond and sell the expensive bond at the same time to lock in the ratio.

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Closing a Ratio Position

1

Monitor Ratio Reversion

Track the ratio until it moves back toward the historical average.
2

Execute Opposite Trades

Sell what you bought, buy back what you sold, using current prices.
3

Calculate Profit

Your profit comes from the ratio change, not the absolute price change.

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Detailed Example: GD30/AL30 Rotation

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Opening the Position

Market conditions:
  • GD30 price: $60,000
  • AL30 price: $55,000
  • Current ratio: 9.09%
  • Historical average ratio: 8.00%
  • Analysis: GD30 is expensive relative to AL30
Trade execution: 
1. Buy 10,909 AL30 @ $55,000 = $5,999,950 total
2. Sell 10,000 GD30 @ $60,000 = $6,000,000 total

Note: Different nominal amounts, but same total peso value!
This is calculated using the ratio.

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Closing the Position

Market conditions later:
  • GD30 price: 59,000(down59,000 (down 1,000)
  • AL30 price: 54,500(down54,500 (down 500)
  • New ratio: 8.25%
  • Analysis: Ratio converged toward average
Trade execution: 
1. Sell 10,909 AL30 @ $54,500 = $5,945,405 total
2. Buy 10,000 GD30 @ $59,000 = $5,900,000 total

Profit calculation:
AL30 result: $5,945,405 - $5,999,950 = -$54,545
GD30 result: $6,000,000 - $5,900,000 = +$100,000

Net profit: $45,455 (before commissions)
Key insight: Both bonds fell in price, but we profited because AL30 fell less than GD30 in relative terms. The ratio is what matters!

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Profit Source Analysis

Why did we profit?
  • GD30 fell 1.67% (from 60,000to60,000 to 59,000)
  • AL30 fell 0.91% (from 55,000to55,000 to 54,500)
  • Relative outperformance: AL30 fell less than GD30
  • Ratio moved from 9.09% to 8.25% (9.2% compression)

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Using the Ratio Calculator

ChuchoBot provides a built-in ratio trade calculator:

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Accessing the Calculator

  1. Dolar → Ratios (or similar menu option)
  2. Enter the two instruments you want to trade
  3. Select settlement terms for both
Ratio Trade Calculator

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Calculator Features

public class RatioTrade
{
    // Instrument to sell (relatively expensive)
    public BuySellTrade SellThenBuy { get; set; }
    
    // Instrument to buy (relatively cheap)
    public BuySellTrade BuyThenSell { get; set; }
    
    // Profit calculation from spread
    public decimal Profit =>
        (BuyThenSell.SellPrice / SellThenBuy.BuyPrice) - 1;
}
The calculator shows:
  • Current prices for both instruments
  • Ratio percentage
  • Required nominal amounts for equal peso values
  • Available depth at current bid/offer

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Visualizing Ratios in TradingView

To track historical ratios and identify opportunities:
1

Open First Asset Chart

Navigate to the chart of your first bond (e.g., GD30)
2

Add Ratio Indicator

Click Indicators → Search for Ratio → Apply
3

Enter Second Asset

In the ratio indicator settings, enter the second bond (e.g., AL30)
4

Analyze Ratio Levels

Look for ratio extremes, support/resistance levels, and mean reversion patterns
TradingView’s Ratio indicator plots the historical relationship, helping you identify when the current ratio is at extremes.

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Common Bond Pairs for Rotation

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Sovereign Dollar Bonds

GD30 / AL30

Most liquid pair, tight spreads, similar duration

GD38 / AL29

Longer duration, more volatile ratio

GD35 / GD41

Same issuer, different maturities (curve trade)

AL30 / AE38

Different issuance dates, duration mismatch

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Dollar-Denominated vs Peso Bonds

  • GD30D / GD30: Dollar vs peso version of same bond
  • AL30D / AL30: Implicit MEP rate trading
Mixing peso and dollar bonds requires understanding currency risk. The ratio reflects both relative value AND implicit exchange rate.

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Profit Calculation

The actual profit from ratio trading comes from the ratio change: 
// Simplified profit formula
OpeningRatio = ExpensiveBond.Price / CheapBond.Price
ClosingRatio = ExpensiveBond.Price / CheapBond.Price

RatioChange = (ClosingRatio - OpeningRatio) / OpeningRatio

// On equal peso amounts
Profit ≈ TotalAmount × RatioChange

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Why Equal Peso Amounts Matter

Using equal total peso values ensures:
  1. Market neutrality: You’re not betting on direction, only ratio
  2. Balanced exposure: Neither leg dominates the P&L
  3. True arbitrage: Profit comes purely from relative movement
If you use different amounts, you’re adding directional exposure, which changes the risk profile from pure ratio trading.

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Risk Considerations

Historical relationships can break permanently due to fundamental changes (default risk, liquidity, etc.).
The ratio can move further against you before reverting. Ensure adequate margin.
Four legs (open buy, open sell, close buy, close sell) mean 4× commissions and fees.
You must execute both legs simultaneously. Partial fills can leave you with unwanted directional exposure.
Less liquid bonds can have wide spreads and difficulty exiting positions.
If the fundamental relationship between bonds changes, the ratio strategy fails.

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Advanced: Ratio Statistics

For sophisticated ratio trading, track:
  • Mean ratio: Average over rolling period (e.g., 30/90 days)
  • Standard deviation: Volatility of the ratio
  • Z-score: How many standard deviations from mean
  • Bollinger Bands: On the ratio itself
Entry signal example: 
If (Current Ratio > Mean + 2×StdDev):
    → Sell Bond1, Buy Bond2 (ratio too high)
    
If (Current Ratio < Mean - 2×StdDev):
    → Buy Bond1, Sell Bond2 (ratio too low)

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Best Practices

Stick to highly liquid bonds (GD30, AL30) for better execution and tighter spreads.
Don’t trade ratios blindly. Study the historical behavior in TradingView first.
Define your target ratio level before opening the position. Don’t chase perfection.
Bonds with similar durations tend to have more stable ratios. Mixing durations adds curve risk.
Use limit orders at the same time to lock in your target ratio. Sequential execution adds risk.
Calculate break-even ratio change including all commissions and market fees (typically 0.5-1% total).

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Ratio Trading vs Directional Trading

AspectRatio TradingDirectional Trading
Market viewRelative valueAbsolute direction
Profit fromRatio changePrice movement
Market riskLower (market-neutral)Higher
ComplexityHigher (2 legs)Lower (1 leg)
Capital requirementHigher (2 positions)Lower
Transaction costs4× legs2× legs
Best forRange-bound marketsTrending markets

Dollar MEP/CCL

Dollar-denominated bond pairs create implicit MEP ratios

Settlement Arbitrage

Arbitrage settlement terms instead of different instruments

Market Data

Real-time prices are essential for ratio tracking

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Technical Reference

The bond ratio analyzer is implemented in:
  • RatioTrade.cs - Core ratio calculation and profit logic
  • FrmRatioTrade.cs - Ratio calculator UI
  • FrmRatios.cs - Ratio scanner interface
  • BuySellTrade.cs - Individual instrument pricing

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