[caffeine]

Trading the same product on two exchanges is the most basic one because you know it's the same product, so correlation should be 1, assuming the cost to transfer between exchanges is zero. Example is arbing US equities.

Crypto is one level more complicated, because you don't share inventory across exchanges and transaction costs are high, which means a coin on Exchange1 isn't perfectly fungible with a coin on Exchange2.

One level more indirect than that might be basis trades, where you trade a derivative ( like SP500 futures) vs it's underlying (the SP500 stocks, although in practice it's SP500 ETFs). So here the correlation is very high but there is a difference between futures, stocks, and ETFs fundamentally, and those play into the pricing.

Going even further might be trading correlated products that don't have the same underlying, example is Nasdaq futures vs SP500 futures.

To simplify: It's basically about the level of correlation between the products. The strategies used to trade different correlations look qualitatively different.

[IgorPartola]

That makes sense and sounds pretty interesting. How “exciting” is this field in terms of innovation currently? Is it mostly about getting high level access to exchanges to speed up trading (which presumably requires paying your way in), or is it more about finding novel signals and ways to use them?