Russell 2000 Index: I Know First Index Forecasts Evaluation Report

Russell 2000 Index Predictions Executive Summary

In this forecast evaluation report, we examine the performance of market indices predictions generated by the I Know First AI Algorithm for the Russell 2000 Index with time horizons ranging from 3 days to 3 months, which were delivered daily to our clients. Our analysis covers the time period from 1 January 2019 to 9 August 2019. Below, we present our key takeaways for checking hit ratios of our Russell 2000 predictions in the market.

Highlights:

  • 91% Hit Ratio for 3-months time period for Russell 2000 predictions allowing our clients to be able to invest their money with significant less risk
  • Predictions consistently hit above 63% accuracy despite volatile market conditions

Note that the above results were obtained as a result of an evaluation conducted over the specific time period to give a presentation for Russell 2000 movements. The following report provides an extensive explanation of our methodology and detailed analysis of the performance metrics that we obtained during the evaluation. This report is a new I Know First evaluation series illustrating the ability to provide successful forecasting on Russell 2000 Index.

About the I Know First Algorithm

stock market predictions

The I Know First self-learning algorithm analyses, models, and provides stock market predictions for the capital markets, including stocks, bonds, currencies, commodities and interest rates. The algorithm is based on Artificial Intelligence (AI) and Machine Learning (ML) and incorporates elements of Artificial Neural Networks and Genetic Algorithms.

The system outputs the predicted trend as a number, positive or negative, along with a wave chart that predicts how the waves will overlap with the predicted trend. Consequently, the trader can decide which direction to trade, when to enter the trade, and when to exit the trade. The model is 100% empirical, based only on factual data, thereby avoiding any biases or emotions that may accompany human assumptions. I Know First’s model only involves the human factor in building the mathematical framework and providing the initial set of inputs and outputs to the system. The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions.

Our algorithm provides two independent indicators for the index – signal and predictability.

The signal is the predicted strength and direction of movement of the index. This is measured from –inf to +inf.

The predictability indicates our confidence in the signal. The predictability is a Pearson correlation coefficient relating to past algorithmic performance and actual market movement, measured from -1 to 1. You can find a detailed description of our heatmap here.

The Hit Ratio Calculation

The hit ratio helps us to identify the accuracy of our algorithm’s predictions.

We predict the direction of movement of the index using our algorithm. Our predictions are then compared against actual movements of the index within the same time horizon.

The hit ratio is then calculated as follows:  

Index in Spotlight: Russell 2000 Index

The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

Russell 2000 Index Price Movements

The Russell 2000 Index was fluctuating from 1 January 2019 to 9 August 2019. Despite a general uptrend over the past 8 months, there were times when the index fell in price during the months of April to May. It is imperative for traders to spot such price changes in the market to profit during such volatile times. 

Evaluating Russell 2000 Index Predictions Hit Ratio

From the results above, you can see that we at I Know First have developed an algorithm that can consistently predict Russell 2000 Index movements throughout various time periods. For the past 8 months, I Know First has achieved the incredible feat of predicting Russell 2000 Index’s exact movement 91% of the times for the 3-months prediction time horizon. This, in essence, means that the algorithm will be correct most of the time on the 3-months time horizon, giving our clients peace of mind to make the safest investments. Additionally, we can also predict the 3-day, 7-day, 14-day and 1-month time horizons with 63%, 69%, 72% and 74% accuracy respectively. This allows our investors to have a safer outlook when investing, even throughout these volatile time periods.

Conclusion

We at I Know First have a mission to provide our clients with the most robust and reliable market forecasts. By sharpening our ability to predict the Russell 2000 Index using our artificial intelligence system, we provide our clients with increasing certainty that their investment will be safer and more profitable. Within the bounds of certainty, we have consistently been able to predict the price movements of Russell 2000 Index for at least 63% of the time over the past 8 months. Our peak performance is the 91% hit ratio over the 3-months time horizon, meaning that on average, our predictions for the Russell 2000 Index’s price movement are correct almost all the time for long term investments.