HIGHLIGHTS


MARKET INEFFICIENCIES

ARTIFICIAL INTELLIGENCE
  • Machine learning algorithms are able to recognize patterns in higher dimensions
  • Algorithmic trading provides disciplined and efficient execution of trades.


RISK MANAGEMENT
  • Kelly Criterion based position sizing with a small fraction of capital at risk.

  • All trades are always hedged with maximum loss known with certainty.


© Hedged Capital LLC. All Rights Reserved.

OUR EDGE: AI-POWERED RISK MANAGEMENT 


“I’d be a bum on the street with a tin cup if the markets were always efficient.”

--Warren Buffett


Financial markets are valuation machines that are continuously pricing assets based on data streams from every source imaginable. However, the signal to noise ratio is very low in all data streams. Information is not instantly impounded into asset prices and consensus reached by rational, profit-maximizing market participants as the fairy tale of the Efficient Market Hypothesis will have you believe. In real markets, with humans and machines, asset prices do not follow a lognormal process, which is better suited for modelling the dynamics of particles rather than emotional, creative, free-willed people. It takes time for market participants to process this barrage of noisy data to value assets in the face of endemic uncertainty, incomplete information and inexact measurements.


​Recent academic research and our own trading experience supports the hypothesis that, at the very least, markets are inefficient in the short term (seconds, hours, days, months and even years). Our algorithms are trained diligently to take advantage of such market inefficiencies and use the best position size for each positive expectation trade. They process multiple, simultaneous market signals with superhuman speed and precision. Our intelligent algorithms trade with discipline, without fear or greed, in the face of grueling market action. And they trade 24/7 without taking a coffee or bathroom break.