SeekingAlpha Opinion: Want To Rule The World? Invest In AI
Following our recent study, let’s look at investing opportunities in Artificial Intelligence (AI) using the Macroaxis Wealth Optimization platform. Here is why:
- AI is a game changing technology, and the world is waking up to it.
- Deloitte: AI is the next frontier in investment management.
Contents:
- Thematic Idea
- Asset Allocation
- MC %
- Instrument Composition
- Market Elasticity
- Risk/Return Ratio
- Asset Ratings
- Technical Analysis
- Correlation Matrix
- Takeaways
- Headlines
Thematic Idea
Firms & funds that are developing tools for AI. Tech companies, funds, and ETFs across multiple industries that are involved in R&D in the field of reasoning, learning, NLP and perception as well as its application to science and e-commerce. This theme may also include entities involved in cybernetics and cognitive brain simulation field.
Asset Allocation
The AI investing theme is composed of its constituencies equally weighted against each other.
MC %
AI theme market capitalization (MC) usually refers to the total value of a theme’s positions broken down into specific market cap categories. To manage market risk and economic uncertainty, many investors today build portfolios that are diversified across equities with different MCs. However, as a general rule, conservative investors tend to hold large-cap stocks, and those looking for more risk prefer small-cap and mid-cap equities.
Instrument Composition
By diversifying AI theme assets across categories where investment returns move up and down under different market conditions, an investor can protect against significant losses. Historically, the returns of the major asset categories such as stocks, funds, ETFs or cryptocurrencies, have not moved up and down simultaneously. Market conditions that usually cause one asset classification to do well often cause another asset classification to have average or poor returns. By investing in more than one asset classification, investors will almost always reduce the risk of losing money, and their portfolio’s overall investment returns will have softer volatility. If one asset category’s investment return falls, you’ll be in a position to counteract your losses in that asset category with better investment returns in another asset classification.
Market Elasticity
The market elasticity of a theme is the measure of how responsive the resulted portfolio will be to changes in the market or economic conditions. Most investing themes are subject to two types of risk – systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Artificial Intelligence theme will adversely affect the performance of its constituents. This type of risk can be diversified away by optimizing the themed equities into an efficient portfolio with different positions weighted according to their correlations. On the other hand, systematic risk is the risk that the theme constituents’ prices will be affected by overall market movements and cannot be diversified. Below are essential risk-adjusted performance indicators that can help to measure the overall market elasticity of the AI theme.
Risk/Return Ratio
An investing theme such as AI should be diversified across asset classifications. So, in addition to allocating your investments among stocks, funds, ETFs, cash, and possibly cryptocurrencies, you will also need to spread out your investments within each asset category. The key is to identify investments in segments of each asset category that may perform differently under different market conditions. One way of diversifying your investments within an asset category is investing in a wide range of entities and industry sectors with different risk-return characteristics, as shown below.
Asset Ratings
Many investors optimize their portfolios to maintain a risk-return balance that meets their personal investing preferences and liquidity needs. Understanding the relationship between the Sharpe ratio, risk, and expected return will help you build an optimal portfolio out of your selected theme. The Sharpe ratios describe how much excess return you receive for the extra volatility you endure for holding a position in a themed portfolio. Below are the essential efficiency ratios that can help you quickly create a reliable input to your portfolio optimization process.
Technical Analysis
The below table shows technical indicators of the assets from the current unweighted theme. These indicators can be significantly improved after the theme is optimized. So, by diversifying this theme into an optimal portfolio, it is possible to reduce not only its total risk but also increase alpha, improve the information ratio and and increase the potential upside.
Correlation Matrix
The AI theme correlation table is a 2D matrix that shows the Pearson’s correlation coefficient between all of the theme’s pairs of securities. The cells in the table are color-coded to highlight significantly positive and negative relationships. The correlation table below represents the degree of relationship between the price movements of different assets included in the theme. In other words, it is a table showing correlation coefficients between all of the theme’s constituents. Each cell in the table shows the correlation between one pair of potential positions.
Read more: Protecting Portfolios Using Correlation Diversification.
Takeaways
- Using investing ideas such as the AI theme to originate optimal portfolios saves a lot of time and completely automates your asset selection decisions. The framework behind a single and multiple investing theme optimization is designed to address the most technical part of the wealth optimization process, including asset allocation, equity research, portfolio diversification, portfolio rebalancing, and portfolio suggestion.
- Macroaxis AI ideas are bundles of up to 20 equally weighted funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of about 70 equities. The Macroaxis Investing Theme typically reflects a particular investment outlook based on shared economic or social characteristics, a joint business domain, or an essential financial categorization feature such as industry, growth potential, capitalization, locality, volatility, or market segment. It is an excellent tool to take your emotions out of your investing decisions.
Headlines
- Exercise or conversion by Nikki Krishnamurthy of 1806 shares of Uber Technologies subject to Rule 16b-3
- Has Netflix Stock Found Its Way North Again – TheStreet
- Tesla Stock Split Everything You Need to Know About the Upcoming Split – The Motley Fool
- 2 Beaten-Down Stocks That Could Turn 250,000 Into 1 Million in 10 Years – Nasdaq
- Schlumberger Ltd. stock falls Wednesday, underperforms market – MarketWatch
- Exercise or conversion by Deirdre OBrien of 31896 shares of Apple subject to Rule 16b-3
- Bona fide gift to Jeffrey Bezos of 278052 shares of Amazon subject to Section 16
- North American Bancard Selects Workday to Help Drive Continuous Innovation – Marketscreener.com
- Top 5 2nd Quarter Trades of PICTON MAHONEY ASSET MANAGEMENT – GuruFocus.com
- Palo Alto Networks to Present at Upcoming Investor Event – Marketscreener.com
- Pure Storage, Inc. Is About To Turn The Corner – Nasdaq
- Low Volume and Rate Hike Worries Expected to Weigh on US Stock Prices – FX Empire
- Keep an Eye on Stock ETFs as the Fed Eventually Ends the Rate-Hike Cycle – ETF Trends
- Exercise or conversion by Sandra Rivera of 1620 shares of Intel Corp subject to Rule 16b-3
- Why Ambarella Stock Is Down 15 percent Today – The Motley Fool
Digital High Science 