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Chance to speak with FS community

9/25/2020

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A quick note to share that we have been spreading the news about our quantum and classical application to select efficient stock portfolios.

Here is a recording of the discussion with Z/Yen / FS Club of London.

We have also spoken at Quantum Computing meetups in Washington DC and San Francisco in September.  Check out the Portfolio page for more details.
​

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The value of our model

9/2/2020

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I was discussing our model with someone close to the work, and I realize the value of this effort may be hard to see.

In short, there are many economic, philosophical, or even emotional ways to pick stocks.  Some try to value stocks so they can 'buy low and sell high.'  Some do cash flow analysis (at least they say they do...I don't know anyone who does this personally).  Some look at growth rates, debt loads, new products, placement in an industry, and social 'quality' of the firm. 

Others have a fear of missing out of the next big thing (I bid on the Google IPO at $85 / share and missed out...but probably could have bought it at $135 at the open).  I missed out.

We leave those ideas to the thousands of analysts employed in selecting and recommending stocks.

We have a different idea and place in the investment value chain.  

We look at how stocks move together.  We believe that you can pick stocks that move together in a way that cancels out some of the risk in holding those stocks. Simply put, then some stocks increase in price, the others decrease, and vice versa.  However, as a group, they move with the market.  If the market is going up, these stocks go up, but in more of a straight line than other stocks would.   
Picture
Photo by Free Textures, Phil. https://www.myfreetextures.com/seamless-background-ripples-gold-metal-texture/
Why does this matter?  Most people don't follow the stock market every hour or even every day.  They buy stocks, or mutual funds, or bonds, or invest in variable annuities as they have extra income and hold it for either retirement, or a big expense like buying a car, a house, or paying for college.  For that individual investor, they only care about the price of the stocks when they want to sell them, for example when they need the money invested in those assets.

A lower amount of movement up or down, because of this ripple effect, means that it is more likely that their investment is doing well, or at least moving with the market, instead of really high or really low when they need it.  Since we don't know when that is...it is better to invest in a way that reduces the downside risk when you need the money.

How do we do this?  We come up with a way to score stock portfolios (we call it the Chicago Quantum Net Score, or CQNS).  We search for the best portfolio with the lowest CQNS score because the variance of that group of stocks, held together, is lower than the the profit expected from holding that group of stocks.  

If there were only 5 stocks to look at (say we live on a very small island with 5 companies), there would be 2^5 combinations of stocks we could hold, or 32 portfolios to check.  We could do that with pencil and paper or a spreadsheet.  We have found a way to look at many more companies at one time. 

As of August 31, 2020, we run 64 stocks through our checker at one time, and find portfolios with expected returns that outweigh the expected variance of the portfolios.  Looking at 64 stocks at one time is challenging, because we have to search from among 18,446,744,073,709,551,615 portfolios.  We do this in under a minute, and have taught a quantum annealing computer to do this in around one second. 

Hope this helps to clarify why we are doing this work.  We help people optimize a portfolio by finding the lowest risk, highest reward combination of stocks to invest in...so they can leverage the ripple effect and have volatility cancel out.

Jeffrey P. Cohen, President, US Advanced Computing Infrastructure, Inc.
September 2, 2020
jeffrey@quantum-usaci.com

We welcome client inquiries.
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    View my profile on LinkedIn

    Jeff Cohen

    Strategic IT Management Consultant with a strong interest in Quantum Computing.  Consulting for 29 years  and this looks as interesting as cloud computing was in 2010.

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Copyright 2021 US Advanced Computing Infrastructure, Inc.  
Chicago Quantum (SM) is a protected service mark, registration 113562, by the Secretary of State of Illinois.

Disclaimer: 
US Advanced Computing Infrastructure, Inc. does not provide personal investment or financial advice to individuals, or act as personal financial, legal, or institutional investment advisors, or individually advocate the purchase or sale of any security or investment or the use of any particular financial strategy.  All investing, stock forecasts, and investment strategies include the risk of loss for some or even all of your capital.  Before pursuing any financial strategies discussed on this website, you should always consult with a licensed financial advisor.  Put another way, the analysis we provide is for general informational purposes only and does not take into consideration your personal circumstances or other factors that may be important in making decisions.    It should not be considered an individual recommendation or personalized investment advice.  The stocks mentioned may not be suitable for all investors.  As with any investment there is risk.  Past performance is not an indication of future results.  Please do your own due diligence on any stock portfolios highlighted.

Unauthorized reproduction or redistribution of this information or the analysis provided in any form is strictly prohibited.

  • Home
  • Team
  • Research
  • Buy Analysis
  • Market Questions & Data
  • Contact
  • Blog
  • Use Cases
  • Platforms
  • Quantum FAQs
  • Chicago Quantum | Corporate Finance 101
  • 1-hour working session
  • 1-day working session
  • 1-week strategy workshop
  • Analyze up to 3,250 stocks (quantum or classically)
  • 64 Stocks (Quantum & Classical)
  • 64 Stocks (Classical)
  • T-Shirts
  • Custom Algorithm Development
  • Platforms Detail
  • Use Case Detail
  • Market Data
  • Validated tickers
  • Portfolio.m