The following is a function that implements the trading strategy using two airline stocks (American Airlines and United Airlines)

Pair Trading Algorithm

// Implements a Pair Trading Strategy 
import numpy as np
 
def initialize(context):
    """
    Called once at the start of the algorithm.
    """   
    
    # Every day we check the pair status
    schedule_function(check_pairs, date_rules.every_day(), time_rules.market_close(minutes=60))
    
    # Our Two Airlines
    context.aa = sid(45971) #aal
    context.ual = sid(28051) #ual   
    
    # Flags to tell us if we're currently in a trade
    context.long_on_spread = False
    context.shorting_spread = False


def check_pairs(context, data):
    
    # For convenience
    aa = context.aa
    ual = context.ual
    
    # Get pricing history
    prices = data.history([aa, ual], "price", 30, '1d')
    
 
    # Need to use .iloc[-1:] to get dataframe instead of series
    short_prices = prices.iloc[-1:]
    
    # Get the long 30 day mavg
    mavg_30 = np.mean(prices[aa] - prices[ual])
    
    # Get the std of the 30 day long window
    std_30 = np.std(prices[aa] - prices[ual])
    
    # Get the shorter span 1 day mavg
    mavg_1 = np.mean(short_prices[aa] - short_prices[ual])
    
    # Compute z-score
    if std_30 > 0:
        zscore = (mavg_1 - mavg_30)/std_30
    
        # Our two entry cases
        if zscore > 0.5 and not context.shorting_spread:
            # spread = aa - ual
            order_target_percent(aa, -0.5) # short top
            order_target_percent(ual, 0.5) # long bottom
            context.shorting_spread = True
            context.long_on_spread = False
            
        elif zscore < -0.5 and not context.long_on_spread:
            # spread = aa - ual
            order_target_percent(aa, 0.5) # long top
            order_target_percent(ual, -0.5) # short bottom
            context.shorting_spread = False
            context.long_on_spread = True
            
        # Our exit case
        elif abs(zscore) < 0.1:
            order_target_percent(aa, 0)
            order_target_percent(ual, 0)
            context.shorting_spread = False
            context.long_on_spread = False
        
        record('zscore', zscore)