Quant Funds Look to AI to Master Correlations

Machine learning shows promise in grouping assets better and predicting regime shifts, say fund managers.

Relationships – whether between financial assets or people – are a complicated business.

Investors pore over asset correlations for clues as to how the behavior of one security is likely to affect the behavior of another. Now, buy-siders are seeking to harness artificial intelligence to control the sorts of changes in asset relationships that can unbalance portfolios, water down diversification – and, ultimately, crimp returns.

The work involves reappraising how securities should be grouped

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