Fundamental analysis continues to face numerous challenges. The COVID-19 crisis has led to delayed earnings, repeated analyst revisions, suspended dividends, and the absence of earnings guidance. Quantitative analysis has long sought to encroach on this territory with its rock-star math. But quant trading models and strategies that mostly rely on pattern recognition can run afoul of the cardinal sin of overfitting. They may also fail to adequately control for political, structural, and behavioural idiosyncrasies.
Given the recent volatility and relative underperformance of passive investment strategies, both fundamental and quantitative approaches are looking to reassert their active selves. But increasingly, the generation of alpha requires a combination of methods. As its name suggests, quantamental analysis combines the best of both disciplines.
Fundamental shops can be helped by quantitative strategies by reducing bad calls from cognitive and emotional biases. Indeed, many such shops are increasingly looking to develop the option of a rigorous quantitative overlay to their investment process using Auto ML and other big data predictive tools.
Machine Learning (ML) has an astonishing ability to extract signal from both fundamental and technical data. When added to the fundamental understanding of, for example, a management team’s ability, the quantamental insight and prediction is invaluable.
Quantitative shops are well-versed in machine learning but are continuously looking to:
- Analyze unstructured data, including text and sentiment
- Discover key signals more quickly and at scale
- Better guard against overfitting
- Develop better backtest models and strategies
Thus, sophisticated ML can augment the investment process of both fundamental and quantitative shops. With Mind Foundry Horizon, you can undertake the stages of the quantitative journey via an easy to use, transparent, and flexible UI.
Mind Foundry Horizon provides an end-to-end solution for building, analyzing, and assessing predictive forecasting models.
We have a webinar on August 6th where you can get an in-depth look at Horizon’s forecasting capabilities and learn how to use it to build an end to end the time series prediction model, figure out essential factors by performing signal analysis, and then wrap your results into a quantitative trading strategy with an acceptable risk profile. Save a seat.
Team and Resources
Mind Foundry is an Oxford University spinout, founded by Professors Stephen Roberts and Michael Osborne, pioneers in the field of AI and Machine Learning.
With a deep understanding of how important these technologies are to our future, the mission of Mind Foundry is to enable Humans and AI to work together to solve the world’s most important problems.
Mind Foundry has developed technology and products that help people bring machine learning closer to their work. Our platform is a new type of Machine Learning that is powerful enough to be trusted by experts and easy enough to be used by people throughout your organization.
Built upon a foundation of scientific principle, organizations use Mind Foundry to empower their teams in entirely new ways.