# Statistical Arbitrage

*Trading & Technical Analysis — Finicade finance glossary*

Statistical arbitrage exploits small statistically identified pricing relationships across many securities, held market-neutral so direction does not matter.

Statistical arbitrage exploits small, statistically identified pricing relationships across many securities, holding a market-neutral book so returns come from relative moves rather than direction. Each edge is tiny and the profit comes from breadth and turnover. Its characteristic failure is crowding: when many funds hold similar positions, an unwind by one forces losses on all, as in the quant quake of August 2007.

**Also known as:** stat arb, quantitative arbitrage

**Related terms:** [Pairs Trading](https://finicade.com/glossary/pairs-trading), [Mean Reversion](https://finicade.com/glossary/mean-reversion), [Algorithmic Trading](https://finicade.com/glossary/algorithmic-trading), [Overfitting](https://finicade.com/glossary/overfitting), [Hedge Fund](https://finicade.com/glossary/hedge-fund)

Source: https://finicade.com/glossary/statistical-arbitrage