Authors - Mohit Apte Abstract - We develop systematic pairs trading strategies exploiting price adjustment lags between commodity-exporting currencies and their underlying commodities using CME futures. Two signal generation methods are compared: a rolling Z-score with Optuna-optimized hysteresis, and walk-forward Ridge regression on fourteen engineered features. Backtests on nine currency-commodity pairs over ten years of hourly data (2016–2026) show the ungated fundamental signal achieves Sharpe 0.56 under realistic costs. Adding rolling cointegration gating improves Sharpe to 0.64 while halving maximum drawdown from 23% to 12%. The ML signal reaches Sharpe 0.92, with strongest results on INR-Gold, AUDCopper, and CAD-Copper pairs. PCA-denoised Equal Risk Contribution sizing pushes ML Sharpe above 1.0 at the cost of higher drawdowns. Results confirm a tradable but risk-sensitive commodity-currency relationship at intraday frequencies.
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