Never has it been more critical to outperform benchmarks while taking a data-driven approach to risk. But current machine learning systems fail to separate signals from noise in complex time-series data
Causal AI understands, explains and predicts financial markets, offering the next generation of portfolio optimization and risk management capability, enabling asset managers to unlock latent market value.
Modern challenges in capital markets are well known
Investors demand lower fees and greater explainability from discretionary managers, while systematic funds must constantly extract new signals from an ocean of marginally useful data. Asset managers can turn to Machine Learning to stay on top of the problem, but current AI techniques are often inadequate:
Solutions
Using causalNet, we can construct factor portfolios that systematically control for unintended exposures — removing cross-correlation effects between factors and dynamically constructing factors based on data, rather than imposing arbitrary definitions.