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The Q.ai Team

How Q.ai Uses AI to Power Investment Management

AI is an acronym that’s thrown around rather often, especially in the fintech space. It refers to artificial intelligence, and it may conjure thoughts of futuristic robots, but there’s a lot more depth to it than that.

Q.ai uses a wide range of AI applications to help investors make money moves and improve the overall customer experience. Here’s what you need to know about what AI is, how it’s used in the investing world and how exactly Q.ai leverages it.

Here’s how AI works

AI refers to a branch of computer science that uses computers and machines to develop algorithms that can mimic the capabilities of the human mind. It works to help individuals and businesses alike interpret large data sets, gather information, solve problems, and make predictions and decisions.

AI democratizes investment management

AI enables both portfolio managers and individual investors to tap into tools to which only hedge funds and high-net-worth individuals had access.

There are three major benefits of using AI in investing:

1. Automation of investment research

While investment research has long been a costly endeavor—with the need to employ research analysts and industry specialists—AI can provide much faster, cost-efficient insights without the need for human involvement.

2. Improved forecasting and risk management

AI enables neural networks to “learn” from mass amounts of data, sometimes including disparate sources and alternative data sets. These AI models can develop insights and predictions that are much more effective than human intuition in protecting holdings.

3. Incorporation of alternative data

Pairing financial data with more qualitative insights is key, but reading and interpreting endless texts on investment options can be an insurmountable task. Natural language processing (NLP)—the application of artificial intelligence to human language and unstructured data—does it for investors. Following application and modifications set by data scientists, NLP engines can rapidly interpret millions of news stories and more to identify companies with major changes in sentiment or public interest. They offer supplementary information for making decisions.

How Q.ai uses AI and machine learning to help investors

AI is utilized in our app to help investors in three key ways.

Create Investment Kits

Q.ai taps into the power of AI to create Kits in which users can choose to invest. Each new Kit starts with an idea, which may be a broad category (Foundation Kits), a short-term trend (Limited Edition Kits) or a unique strategy (Select Kits). These ideas generally start with Q.ai’s chief investment officer, but they may come from anyone on the team.

Once the team decides how the Kit idea should be expressed, both in regards to structure and assets to include (the investment universe), the quant team builds each Kit. It’s then at this point that AI takes over human involvement to select securities each week and allocate the weight for each of them. It’s important to note that the AI learns and behaves differently for each Kit because each is exposed to specific securities and their features. 

Manage risk between Kits

While each Kit is already designed with AI, Q.ai also leverages another layer of AI to manage risk between the various Kits in a user’s portfolio. Q.ai diagnoses each Kit’s specific riskiness and how correlated that risk is with other Kits. From there, Q.ai uses AI allocation to balance the amount invested in each Kit to better manage those risks.

The ability to manage risk across Kits is key in the overall success of investors’ portfolios. AI allocation across Kits can help optimize returns over time through diversification and trying to limit large downswings.

Portfolio Protection

Q.ai’s Portfolio Protection feature uses AI predictions to adjust allocations to forecasted risks.

Q.ai’s Portfolio Protection uses AI-powered forecasts to adjust Foundation Kit risk in advance of potential negative impacts. It doesn’t just take into account market risk, however. Portfolio Protection considers major factors, such as interest rate risk, oil price risk and volatility risk. It continuously evaluates the historical sensitivity of each Foundation Kit’s holdings to these factors and in relation to each other in order to protect holdings and make more precise adjustments.

It uses predictions from multiple neural networks, each of which are structured and trained differently, to forecast changes in the aforementioned factors. Q.ai’s Portfolio Protection uses these forecasts to add hedges that offset negative expected impacts to the Kits based on their sensitivities.

Q.ai is constantly working to dig up the data and crunch the numbers for you, so you can focus on what really matters: your personal investment goals.

Invest smarter. Start investing with AI.

Disclosures
Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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