The idea that Black Boxes must be expensive and slow to change has been shoved down our throats by oversized and overpriced consulting firms. Well, that is about to change
What are Black Box Strategies?
Quantitative investing, otherwise known as "Black Box" investing is a disciplined way of investing in stocks that tries to take the human emotion out of it. The investor alternates between two states: planning, and execution.
Create strategies that key off of fundamental and technical indicators to find stocks that will outperform, have lower volatility, etc.
Follows the strategies created and modified during the planning stage.
This two-step process helps prevent emotionally driven trades typically executed by human traders.
|Equities||Mutual Funds, ETFs, Options||Screener||On Call Quantitative Specialists|
|Backtesting||Predesigned Screens||Fundamental Data||Technical Data|
|Windows, Mac, Linux||Delisted Stocks||Custom Charting||Estimates|
|Historical Data||Data Fields||Macroeconomic Data||Intraday Day|
Interested, but have more questions? Give us a call at (678) 939-4137.
Don’t feel like talking? Drop us an email at email@example.com
What's Wrong With Traditional Black Boxes?
They will "blow up" as the market changes and adapts.
With a traditional black box, you must then wait for custom development resources to become available from a consulting company that already knows your business is locked in. Time and money slip away very quickly.To protect against this we offer a monthly subscription to our service with ongoing support. Whenever you decide you need a new strategy (worst case), or a few tweaks (more common) the answer is the same: give us a call and we make the changes happen in a matter of a few hours.
The market is starting to go through a shaky period, and the entire world is starting to say it is end of the bull market. We see this in the number of stocks that are in free fall, the amount the worst industry is underperforming the market, the slowing earnings coming out, and in countless other ways.
What happens if another recession hits and portfolios tank? Do you have a strategy to make money while the market falls off a cliff? Are you protected against massive changes in market volatility? If not, you may want to step into the world of Equities Lab. It’s time to take a step back and start protecting your investors’ money.
How long have you been in business?
We have been in business since 2009. In that time we have had the pleasure of working with hundreds of clients and we thoroughly enjoyed every moment spent helping our users.
Why don’t you just publish your own black boxes?
Because that’s not who we are. Gathering assets, managing clients, compliance, and that special touch are what you bring to the table.We don’t want to compete with that. We want to focus on what we do best, which is writing awesome software and leave you to do the same.
What other firms use you for their screening and backtesting needs?
For security and confidentiality reasons we do not disclose the identities of any individual or firm using our platform. When you use Equities Lab you can use it in complete confidence.We can say we are used in a variety top MBA programs throughout the country.
Why don’t you include intraday data?
Our system is designed around long term quantitative investing based on broad market analysis using gigabytes of fundamental data.Quite frankly, it is virtually impossible to both do that type of analysis and do the tick-by-tick analysis of stocks.Rather then do both poorly, we focused on being the best-in-class at deep fundamental analysisA common pattern our clients use is to use Equities Lab to generate the stocks to buy and sell, then feed that basket of stocks into their real-time trading system.
Why should I use you rather than Bloomberg?
Who said anything about instead? Bloomberg is a fantastic product. It has data we will never have, ranging from quotes on North Korean bonds to Indian stock market and econometric data, and much more. It has earning estimates, and analyst ratings. If the $25,000 annual investment makes sense for your business we do highly recommend them.However, Bloomberg's screener and backtester technology is simply not advanced enough to quickly create a robust black box. Bloomberg's primary focus is feeding data to traders, not designing black box trading algorithms.
Why do you use Morningstar data?
We value their ability to really dig into the statements -- who else has TransportationRevenue, UnearnedIncome, etc.This wealth of information can be confusing for novices, but it gives experts an scapel they can use to carve their desired strategy out of the data
Where do you get your economic data?
We use the data provided by Federal Reserve Economic Data
Can I get extra data included in my subscription?
Yes, we use Quandl to import custom data for our customers.
A Sample Consultation
Hello, I"d like to create a new strategy that spends very little time in the market, but it needs to make at least half of what the S&P has made over the past 20 years, and it also needs to have an extremely low standard deviation.
Alright, let's take a look at how we can achieve this goal. Do you have any specific ideas on how you want to procede?
Yes, actually, I only want larger companies with a market cap over $2 billion. I also want companies with low P/E ratios and I want these companies to not be extremely volatile.
Perfect. Let me go ahead and create this base strategy right now and we will work from there. Okay, so here is your base formula. We made sure every company we found had a market cap above $2 billion, the change of close could not be above 10% or below 0% over the past year, and the P/E had to stay between the range of 0 and 20. As you can see we already have a lower standard deviation than the market and we are only barely under the S&P.
Okay, what do you think the next step should be?
Well, we have a formula that looks at the volatility over the past three months, makes sure a company has been buying back shares over the past year, and that the average volume has been growing over the past 100 days. Basically it checks to make sure a company is/has been stable and that they are taking actions to spur growth in the near future. So, you can see that it didn"t work as well as we hoped. However, you are in the market far less than before. You have the same standard deviation as before with half of the returns. However, let's give the formula some wiggle room and say that, at a minimum, only 2 of the three criteria have to be met for the screener to purchase it.
Okay, great. Can we also change the rebalance period to quarterly? My fund won"t be trading these positions often as they are in a buy and hold section of our portfolio.
Quarterly rebalancing is the default for our system. It isn"t hard to change later on, but to start off, all strategies are quarterly. At this point I"ll also make sure to add trading costs of 0.01% of all trades to reflect Again, this is not the result we want. I have an idea. How about we make minimum our formula needs to be a two within thirty days rather than 252. This will let more companies match into the screener.
Can we make it to where it has to match all three criteria?
Absolutely, I'll go change that and run the backtest for you.There we go! In this strategy we aren't in the market very often, but when we are we do pretty well. There have been only two down years since 1995. You made just over half what the S&P made in that time frame, and you did it with half the standard deviation. However, before we get too excited, let's test different rebalancing periods to make sure this works across the board and isn't just a fluke....Great! Changing the rebalancing periods doesn't really affect your returns that drastically. Is there anything else I can help you with right now?
Nope, you've done more than enough. Have a good day.
You as well. Goodbye.