Algorithmic Trading · Technical Publication

Ornstein-Uhlenbeck Mean Reversion Backtest in Python: From SDE to Signal

Implement and backtest a mean-reversion strategy using the Ornstein-Uhlenbeck process with OLS estimation, half-life calculation, and vectorized signal generation.

Technical White Paper Enter QuantLab

Publication TrackAlgorithmic Trading

Date of Release2026-07-30

Reading Time14 min read

StatusVerified Engineering Article

#mean reversion#ornstein uhlenbeck#backtest#python

Executive Brief

Key Takeaways

01.OU process SDE derivation
02.OLS estimation
03.Z-score entry rules
04.Realistic slippage backtest