Invest in AI via Macroaxis Sep ’22 Update

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:


  1. Thematic Idea
  2. Asset Allocation
  3. MC %
  4. Instrument Composition
  5. Market Elasticity
  6. Risk/Return Ratio
  7. Asset Ratings
  8. Technical Analysis
  9. Correlation Matrix
  10. Takeaways
  11. Headlines
4 AI pillars
Source: Deloitte

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.

AI thematic idea
AI vs DOW stocks
09-21-2022 DOW -3.99%, AI +3.12%

Asset Allocation

The AI investing theme is composed of its constituencies equally weighted against each other.

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.

Market Capitalization (%)

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.

Instrument Composition And Concentration

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.

Market Elasticity

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.

AI portfolio risk vs daily expected return

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.

Asset Ratings
Asset Ratings (continued)

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.

Technical Analysis Of Total Daily Returns

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.

Portfolio correlation matrix
Portfolio correlation matrix (continued)

Read more: Protecting Portfolios Using Correlation Diversification.


  • 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.



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