Ornstein-Uhlenbeck
A mean-reversion model — the pull back to equilibrium.
The Ornstein-Uhlenbeck (OU) process models a series that drifts but is constantly pulled back toward a long-run mean. It’s the mathematical backbone of mean-reversion trading.
How to read it
- The overlay shows the equilibrium level and how strongly price is being pulled toward it.
- Stretched far from the mean → a reversion back is statistically more likely.
- The model also implies how fast reversion tends to happen.
When it fits: OU describes range-bound and mean-reverting markets well — pair it with a low Hurst reading. In a strong trend, mean-reversion assumptions break down.