Chicago Quantum Net Score Optimal Short U.S. Common Stock Portfolios
Each time we run our Chicago Quantum Net Score Short (or DOWN) Analysis, we 'crunch the data' to identify the best short portfolio. We do that by executing a search that can potentially evaluate all of the possible combinations of stock portfolios. We iterate that search by making a list of the worst portfolios we found, then looking more closely at that list of stock portfolios.
A few points of explanation:
The short model needs much less analytical and computational power than the long model. It finds answers more quickly. The portfolio sizes are generally smaller, and I cannot recall seeing a well-optimized short model with more than five stocks.
The simple explanation is that short portfolios have terrible risk/reward profiles. They are too risky.
The best and fastest way to reduce portfolio risk is through diversification.
So, if you take the worst stocks and build a large portfolio with many of them, the overall portfolio is still bad, but it quickly moves towards neutral.
We provide our clients who buy our CQNS Short Analysis the worst 50 optimized portfolios in order of their Chicago Quantum Net Score. This allows them to trade off the benefits and costs of substituting different stocks, holding different combinations of stocks, or maybe avoiding certain market sectors.
We provide our clients with a spreadsheet of all stocks that pass data validation and are included in our data analysis, and that spreadsheet includes the CQNS score for each ticker. Clients can also look at the best individual stocks to either buy or hold that list (if they want to act on one stock at a time).
A few points of explanation:
- Our CQNS stock portfolios are evenly weighted, so if you want to short 10 stocks, each is 10% of the portfolio.
- We include in our search every stock that trades that day and that passes our data validation criteria for liquidity, absence of anomalies, and sometimes a market cap or stock price floor. On January 28, 2024, the analysis included 3,266 U.S. Common Stocks
- The current results of the model are picking portfolios that are expected to do very poorly (lose value) in all markets, or at best to break even. This model loses the most money when the overall U.S. Stock Market does poorly. It may increase in value (and has in the past) when the overall U.S. stock market increases, although is not expected to increase very much. It moves in the opposite direction of the market without being a negative BETA portfolio.
- When we established our separately managed accounts based on the Chicago Quantum Net Score, we hedge those accounts (per client request).
The short model needs much less analytical and computational power than the long model. It finds answers more quickly. The portfolio sizes are generally smaller, and I cannot recall seeing a well-optimized short model with more than five stocks.
The simple explanation is that short portfolios have terrible risk/reward profiles. They are too risky.
The best and fastest way to reduce portfolio risk is through diversification.
So, if you take the worst stocks and build a large portfolio with many of them, the overall portfolio is still bad, but it quickly moves towards neutral.
We provide our clients who buy our CQNS Short Analysis the worst 50 optimized portfolios in order of their Chicago Quantum Net Score. This allows them to trade off the benefits and costs of substituting different stocks, holding different combinations of stocks, or maybe avoiding certain market sectors.
We provide our clients with a spreadsheet of all stocks that pass data validation and are included in our data analysis, and that spreadsheet includes the CQNS score for each ticker. Clients can also look at the best individual stocks to either buy or hold that list (if they want to act on one stock at a time).