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Today is risk off: Best, Optimized Investment Portfolio has 62 Common Stocks

3/15/2023

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Good morning readers,

Our Chicago Quantum Net Score model found the best solution last night with 62 US-listed common stocks, giving an edge of 7 x 10-5, which is a meaningful, but smaller than usual edge over investing in the $SPY, or the S&P 500 Index ETF. This is based on our proprietary platform and algorithm to find portfolios with the biggest difference between the portfolio's historical risk and expected returns.

A portfolio that requires 62 stocks to gain an edge on the market is calling for significant diversification, with a holding pattern similar to the S&P 500. The top 25 portfolios have between 59 and 63 stocks.

Our portfolio model selects a group of stocks that are held evenly, so 62 stocks means 1/62 of your portfolio is invested in each one.

Our portfolio model excludes ETFs, so you will not end up holding multiple 'copies' of a popular stock. We are considering to add back the commodity ETFs as that can give an investor an additional edge. We are thinking of ETFs like SLV (silver), AAAU (gold), USO (oil), and CPER (copper).

Why is the model risk off?  We see three potential reasons:

1.  The expected return and the risk-free rate of return over the next 12 months are converging, and the expected benefit of holding risk is 4% or less today. That means our model is mathematically looking at reducing risk more than it is looking at increasing returns. Lower risk means greater numbers of stocks.
2. A rising tide lifts all boats in this market. It is possible that there are fewer situations where stocks counter-act each other, and have negative (stock - stock) correlations.
3. The large-cap stocks are starting to see a 'flight to safety' and are less volatile in this liquidity constrained market, so they are relatively more attractive than small cap stocks. This last one is a stretch.

We do see negative BETA stocks in today's run, so there are still anomalies out there. These move opposite to the SPY and have done so for the past year.

 Here are the stocks with BETA values outside the data validation range. 

CDTX   -0.370 Cidara Therapeutics Inc                           
CPK    -0.611 Chesapeake Utilities Corp                         
CYN    -0.532 Cyngn Inc                                         
FWBI   -0.369 First Wave BioPharma Inc                          
GWAV   -0.468 Greenwave Technology Solutions Inc                
MFH    -0.185 Mercurity Fintech Holding Inc                     
MKUL   -0.593 Molekule Group Inc                                
SMMT   -0.135 Summit Therapeutics Inc                           
UHAL   -1.361 U-Haul Holding Company                            
VERU   -0.885 Veru Inc   
​
​Good luck to all.

Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.
Chicago Quantum
​
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    Jeffrey Cohen

    Full-time investment advisor and student of the financial markets.
    Previous career was as an executive running global / US IT services businesses.

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Copyright 2023 US Advanced Computing Infrastructure, Inc.  
Chicago Quantum (SM) is a protected service mark, registration 113562, by the Secretary of State of Illinois.
US Advanced Computing Infrastructure CRD#: 316375
Business Mailing Address: 833 Central Avenue #1292, Highland Park, Illinois 60035-7292

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  • Home
    • About Us
    • Contact
    • Our Brochure
    • Positions
    • T-shirts
    • Nextsteps
  • Advisory Services
    • Stock Portfolio Services
    • US Composite: Up Run
    • US Composite: Down Run
    • Your Stocks: Up Run
    • Your Stocks: Down Run
    • Investment Planning
    • Membership
  • Project Services
  • Market Information
    • Retail Investor
    • Why Use ETFs
    • Negative BETA Stocks
    • Top Dividend Stocks
    • Stock Price Variance
    • Leptokurtic Stocks
    • Platykurtic Stocks
    • High & Low BETA Stocks
    • Skewness in Daily Returns
    • High & Low Volume Stocks
    • Top Stock Movers
    • Price & Volume Spikes
    • Stock Splits
    • Common Stock Beta Detail
    • More Details on Kurtotic Stocks
    • US Banking Observations
    • Liquidity Research
    • MEME Stocks
    • Corporate Finance 101
  • Managed Accounts
    • Managed Account BLOG
    • Managed Account Fees
    • Considerations
  • Quantum Computing
    • Quantum Computing Use Cases
    • Use Case Detail
    • Platforms
    • Platforms Detail
    • Quantum Computing Notes
    • Quantum Computing Stocks
    • PQC Post Quantum Cryptography
  • Insights of Today
  • Research
  • New BLOG 2023