The article explores how statistical arbitrage strategies can be used in China's capital market to find profitable opportunities. By improving traditional methods and using co-integration models, the researchers identified smooth fluctuating stocks and established equations to conduct statistical arbitrage between any two stocks. This approach not only increased the frequency of successful arbitrage but also allowed for a wider range of stock pairs to be included in the arbitrage portfolio. The co-integration formula developed in the study is valuable for identifying arbitrage opportunities in the Chinese capital market.