At the beginning of the new year our team has compiled a list of research activities for 2019 and through this post, we would like to introduce you to the most important milestones. The implementation of the Relative Value trading approach will conclude at the beginning of the new year. We will inform you about the results. After completing the task, the research team will take a short turn onto the field of gold markets. The result of this 14-day sprint should be a profitable trading system using price momentum of futures contracts.

After this sprint, the team will dip into a portfolio optimization process and metastrategy development. Optimization of the rule-based strategy portfolio is a major challenge for the team from technological and commercial point of view. We will have to merge alpha-generating rules with one-level-higher optimization issues (maximizing profit vs. risk minimization, with respect of the investment horizon vs. availability of data and technical feasibility of execution etc.). At the same time as the chapter is opened, the development of instruments for individual business approaches used by hedge funds and mutual funds will continue (Fixed Income, Global Macro, Long/Short).

In addition to these tasks, the team awaits other activities – at the beginning of April some members will participate in the Asset Management 4.0 conference organized by the Association for Communication Tools and the Internet of Things. As a part of the conference, team members will gradually comment on the themes of automation of decision-making and reporting processes, creation of mathematical-statistical models, optimization and risk management.

Another news that awaits us this year is our resolution to give you a report of our activities every week at least in one post. We will also inform you about how our business approaches are being conducted in real terms.

We will look forward to regular meetings and wish you all the best for the new year.

Michal Dufek

Besides research-related and data analysis activities, our team also deals with automation and simplification of analytical processes. In today’s post, we would like to introduce the first type of report – quarterly earnings announcement and its analysis.

The report follows the impact of the announced Earnings (with the quarterly period) on the price on the selected assets. Let’s take Deutsche Boerse AG as an example.  An investment analyst or a portfolio manager responsible for the decision-making process shall receive the necessary information:

The report below gives the analyst as an insight into how strongly and in what direction the market has reacted to the reported results. The sentiment of movements, of course, determines the ratio between the estimated EPS value and the announced value. If the current value is higher than estimated, it’s a „positive information“ and if the current values are lower than expected it’s „negative information“.

The practical use consists of a given overview of how the markets have absorbed information about the published results of the analyzed assets in recent quarters. Next a balance of positive and negative deviations in real values from those brings useful information, indicating whether the expected results are systematically underestimated, in line with the announced results or overestimated.

The report can be used by investments analysts or portfolio managers to receive a quick overview of how the analyzed assets reacted to the Earnings Announcement of the results in past quarters, thus, for example, obtaining information on whether the expected results in the summary are overestimated or undervalued.

Michal Dufek