In times of high volatility it is more important to know what not to do.
Avoid high-complexity assets.
We use Next-Generation AI to identify hazardous assets.
A new way to see risk.
Science not opinions.
High Complexity - A New Form of Risk
Stocks interact as large, complex and dynamic networks, that change constantly. The nature and structure of this complexity should be known in order to better understand risk and volatility. This is because complexity is a hidden systemic form of risk.
A great way to understand complexity is to measure it.
In turbulence such intricate networks contain numerous hubs - concentrations of risk. In order to reduce the exposure of a portfolio, it is paramount to position oneself away from high-complexity assets.
Below the arrows indicate two potentially hazardous stocks that dominate the structure of the stock universe in their vicinity as well as risk.
The region around the hazardous stocks is not the best place from which to pick stocks.
See example of stock interaction network. The example is the FTSE 100. Large squares represent the hubs, i.e. high-complexity stocks.
The bottom line:
We don’t tell you which stocks to pick or how to build your portfolios - we tell you which stocks to avoid.
AI 2.0 For a New Correlation Science
Correlations play a central role not just in portfolio design or risk management. It is paramount to get them right. However, conventional linear correlations may deliver misleading results. This is because they cannot capture nonlinearities in data. Data very rarely has a linear look and feel or a gaussian distribution.
UR has developed a radically innovative generalized correlation, which takes into account nonlinear aspects of data. The method relies on a brand new next-generation AI technology which treats data as images, emulating an expert looking at it. The system actually sees correlations.
Data is analyzed by emulating the brain without the need to build math models.
The method has its roots in quantum physics, nonlinear mechanics and biology.
Based on this approach we determine the true structure of correlations and the Complexity Landscape of a universe of assets.
We offer the correlation of the 21st century. Over the last decade our generalized correlations have been tested and are being utilized in medicine, manufacturing, defence, air traffic management and Business Intelligence. in software and hardware solutions.
How It Works
Complexity rating of stocks in a universe of up to 1000 stocks is possible. The tool is hosted on AMAZON Web Services:
Users upload anonymized price data in CSV (Comma Separated Values) files. The system returns a text file with stocks ranked in terms of their complexity within the universe.
Stocks at the top of the complexity ranking are to be avoided. This is because highly complex stocks induce volatility, drive exposure, reduce diversification and may affect negatively the performance of a portfolio. Complexity is a modern way to measure volatility.
The tool can also be used to analyze the complexity makeup of indices - click on link below: