​The Incredible Rise of Artificial Intelligence in Investing

Michael S. Young  |

The buzz around artificial intelligence continues to reach unprecedented levels. From Facebook (FB) and Google (GOOGL) to Netflix (NFLX), Paypal (PYPL), IBM (IBM) and leading hedge funds, AI is at the top of the radar. Goldman Sachs (GS), in fact, predicts the next Apple (AAPL) or Facebook will be an AI company.

To quantify this growth, Investors Business Daily reported this month that leading research firm Tractica is forecasting that artificial intelligence revenue will reach $59.8 billion worldwide by 2025, up from $1.4 billion in 2016. Another market research firm, IDC, believes AI revenue will grow from $8 billion in 2016 to more than $47 billion in 2020.

In the investment world, where early adoption is essential, artificial intelligence is a major theme that fund managers and investors alike are discussing and debating as they reexamine their approaches and portfolios to incorporate this groundbreaking technology.

As an investor, you are probably growing tired of lackluster returns from your stock and bond portfolio and yearning for better performance from your manager(s). Before determining your first foray into investing with a manager utilizing advanced AI and algorithmic approaches, however, you need to understand AI and algorithms.

By definition, an algorithm is any well-defined computational procedure that intakes a value, or set of values, as input to produce a set of values as output. In other words, algorithms are like road maps for accomplishing a given, well-defined task. It’s a mathematical coded road map of defined rules that are followed without emotion or question.

Artificial intelligence on the other hand is a bit more sophisticated, as AI is created to emulate human thought processes. AI is a computational system that relies on voice and/or optical recognition to make decisions based on quantitative analysis, and in other instances AI is a computational ability to make complex decisions “on the fly” based on any series of changing data inputs. AI was most prolifically introduced to every day consumers with the dawn of the iPhone. Today, for example, technology and robotics are making it easier than ever for humans to use only their voice to accomplish daily tasks.

Asset managers that use AI rely on it to operate and make trading decisions according to pre-set rules that are used to interpret market data or data in general in any specific sub-set. The successful use of the combination of Algorithms and AI creates a tremendous value add to asset managers keen enough to have developed such a system.

At present, many asset managers are not using AI because the typical asset manager profile employs buy and hold strategies and are not trading large volumes on a daily basis. Those managers that do use AI, however, are more likely to be traders using a rigorous quantitative strategy, and are much more focused on shorter term market conditions.

As an example, Mediatrix Capital relies on a sophisticated, proprietary approach coupled with artificial intelligence in the Spot Markets. By capitalizing on modern technology, our systems can concurrently trade different precious metal and currency pairs based on signals that indicate the highest probability of market direction for profitable trades.

Statistically, there is a greater probability of achieving maximum profits while using less equity when there are more currency pairs from which to select the highest probability of success. The Algo Navigator trades in a manner similar to a hedge when positions don’t go as expected and zone recovery is required. The deployment of the AI functionality, in a defensive strategic sense, creates tremendous barriers to loss, paving the way for asymmetric return profiles.

What does the future hold? The next step with AI, in my view, is to enhance its ability to think and act exactly like the human mind. This capability is evolving at a fast pace, frightening in some respects, but astonishing in reality. For example, with Mediatrix, when trading Spot markets, the goal is to use AI to do what a substantially large group of people would be required to do in sync, omnisciently and all simultaneously, but now systematically and without the barriers of emotion.

As investors, we can’t afford to overlook the opportunity to profit from artificial intelligence. Its future is bright and hopefully yours can be as well.

In no event should the content of this material be construed as an advertisement, express or an implied promise, guarantee or implication by or from Mediatrix Capital Inc. (MC) or any of its partner or subsidiary companies. This is not an attempt to sell or solicit any security and should not be taken as such. The content of this document is for informational purposes only. Potential Accredited Investors are advised to carefully read the Disclosure Documents to determine whether a managed investment in MC is consistent with their financial situations and investment objectives. Past results are no guarantee of future performance. Mediatrix Capital is a foreign corporation based in Nassau Bahamas, and does not operate within the United States.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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