A Cointegration-Based Study of Mean-Reverting Equity Pairs in Indian Banking

The project carries out an independent empirical investigation of cointegration-based mean reversion among Indian banking equities. Daily closing prices for HDFC Bank and ICICI Bank are studied using the Engle-Granger two-step procedure; the resultant spread is then modeled as an Ornstein-Uhlenbeck process. This research is methodological rather than predictive in its focus on the statistical conditions under which mean-reverting dynamics may emerge among sector peers. Limitations in terms of regime stability, transaction costs, and generalizability are discussed. All results are reproducible through the accompanying Python implementation.