In times of high volatility it is more important to know what not to do.
Avoid high-complexity stocks.
We use Next-Generation AI to identify hazardous stocks.
A new way to see risk.
Science not opinions.
High Complexity - A New Form of Risk
Stock interaction takes the form of 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.
In times of turbulence these networks are intricate and may 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 stocks.
Below the arrows indicate two potentially hazardous stocks - hubs - 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. The green region, on the left, is safer.
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 in measuring risk. 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 and modern generalized correlation, which takes into account non-linear aspects of data. The method relies on a brand new next-generation AI technology which transforms data into images, emulating an expert actually looking at it. The system 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 can determine the true structure of correlations and the Complexity Landscape of any universe of stocks.
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.
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 new and modern way to see volatility.
The tool can also be used to analyze the complexity makeup of indices - click on link below: