Quantitative Trading

Business challenge

  • Trading houses needs to identify groups of stocks that exhibit similar behaviour
  • Improve Price predictions
  • Improve options pricing and minimize errors in hedging

Solution

  • Used time-series clustering techniques to identify groups of similar stocks
  • Gained qualitative insights: Instruments with varying degrees of memory

Business benefit

  • Hedging the mean error (difference between risk-free return and actual) reduced by as much as 50%