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The Q.ai Team
June 6, 2022

About the Large Cap Kit

About the Large Cap Kit

Disappointing earnings and slow to no economic growth can feel discouraging for investors as stifling inflation and rising interest rates crush consumer confidence. But that’s why we created a Kit for investors to make the most of it.

The Large Cap Kit is a low-risk way to potentially gain from what, at large, may not feel like a winning situation. While the mechanics aren’t so simple (it’s a pair trade) we make it simple for you.

Here’s how it works.

Capitalize on low earnings and economic growth with the Large Cap Kit

Expectations suggest low earnings and GDP growth, which represents a greater risk to smaller companies, by market capitalization, than to larger ones. Generally, in low- to no-growth environments, smaller companies tend to underperform larger ones.

That’s why the Large Cap Kit takes a long-short approach to benefit from the expected divergence between large-cap stocks and small-cap stocks. This way, investors can benefit from the difference in relative value. 

Sure, it’s possible that the entire equity market will decline, and sure it’s possible that it’ll completely climb. Either way, so long as larger-cap companies outperform small-cap stocks—as they so often do in these environments—investors in this Kit should see gains.

Invest in large-caps and short small-caps

Investing long and shorting can get messy for everyday investors, especially when it comes to paired trades. Therefore, we use inverse ETFs to offer you the same but simplified benefits of holding short positions. 

The Large Cap Kit rebalances weekly to hold equal weights of the large-cap ETF, Russell 1000 ETF, and an inverse ETF for small-cap companies, the inverse Russell 2000 ETF.

All in all, the Kit holds equity in the 1,000 largest U.S. companies and shorts the next 2,000 largest.

Benefit from muted growth with the Large Cap Kit

The Large Cap Kit is designed to help you benefit from the long-term macro view that U.S. GDP growth will be slow. 

What’s important is not what happens to the economy but, rather, how large- and small-cap companies move in relation to each other. In other words: The Investment Kit is relatively indifferent to the overall direction of the market and could actually appreciate in value in a further market downturn if small caps suffer worse than large caps. 

Bottom line

Through this Kit, you can benefit from market expectations for low earning and GDP growth with neutral exposure to the overall market.

Better yet: Because it’s one of our specialized paired trades, we’re offering it to you as a smaller position. The low investment minimum of the Kit is only $25, making it  more affordable and easy to diversify your portfolio.

This kind of Kit would be productized by major hedge funds for high-net-worth investors, but Q.ai makes it easy for everyone.

Add the Large Cap Kit to your investment portfolio in Q.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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