Stock Picking Based on AI: Long Stock Strategy

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Stock Picking: I Know First provides investment solutions for both individual and institutional investors, utilizing an advanced AI self-learning algorithm to gain a competitive advantage. We offer a personalized approach to our institutional clients, assisting them in their investment process based on their specific needs and preferences. For more details about I Know First solutions for institutional investors, please visit our website.

Stock Picking: AI-Powered Long Stock Strategy

The following trading strategy was developed using I Know First’s AI Algorithm daily forecasts from January 1st, 2020, to April 12th, 2024, with a focus on S&P 500 stocks selected based on the signal filter. This strategy is available to our institutional clients: hedge funds, banks, and investment houses, as a tier 2 service on top of tier 1 (the daily forecast).

The strategy involves constructing a tier-weighted portfolio with 25 stocks from the S&P500 index with monthly rebalancing, achieved through the implementation of the predictability filter. Moreover, the strategy controls the majority direction. The term “majority direction” refers to our predictions for stocks, upon which we base our position. This decision is guided by a number of long and short stock forecasts. Therefore, if the count of long stock forecasts surpasses the count of short stock forecasts, the majority direction is to go long and we construct a long portfolio. Conversely, if the count of short stock forecasts is higher, we assume a short portfolio.

In the case of this strategy, if the majority direction is long, we construct a monthly tiered weighted portfolio based on the predictability filter. If the majority direction is short, we go short in SPY at 50% and 50% keep in cash until the next monthly rebalancing.

The strategy provides a positive return of 241.93% which exceeded the S&P 500 return by 179.99%.

The strategy provides a positive return of 40.56% which exceeded the S&P 500 return by 24.8% in 2020.

The strategy provides a positive return of 56.1% which exceeded the S&P 500 return by 29.5% in 2021.

The strategy provides a positive return of 0.08% which exceeded the S&P 500 return by 19.56% in 2022.

The strategy provides a positive return of 34% which exceeded the S&P 500 return by 10.21% in 2023.

The strategy provides a positive return of 6,66%, at the same time the S&P 500 provided a return of 10.57% until May 14th, 2024. We can notice the main level 1 sector in each rebalance period.

Below we can notice the strategy behavior for each year.

The I Know First strategy has an impressive Sharpe ratio (which compares the return of an investment with its risk) of 1.07 and a Sortino ratio (which compares the return of an investment with its given level of downside risk) of 1.56.

I Know First Algorithm – Seeking the Key &  Generating Stock Market Forecast

Stock market predictions: Basic Principle of the "I Know First" Predictive Algorithm

The I Know First predictive algorithm is a successful attempt to discover the rules of the market that enable us to make accurate stock market forecasts. Taking advantage of artificial intelligence and machine learning and using insights of chaos theory and self-similarity (the fractals), the algorithmic system is able to predict the behavior of over 13,500 markets. The key principle of the algorithm lies in the fact that a stock’s price is a function of many factors interacting non-linearly. Therefore, it is advantageous to use elements of artificial neural networks and genetic algorithms. How does it work? At first, an analysis of inputs is performed, ranking them according to their significance in predicting the target stock price. Then multiple models are created and tested utilizing 15 years of historical data. Only the best-performing models are kept while the rest are rejected. Models are refined every day, as new data becomes available. As the algorithm is purely empirical and self-learning, there is no human bias in the models and the market forecast system adapts to the new reality every day while still following general historical rules.

Stock Picking: Conclusion

I Know First offers investment solutions for institutional investors, leveraging our advanced self-learning algorithm to gain a competitive advantage. We provide a personalized approach for our institutional clients, enhancing their investment process according to their specific needs and preferences. In this context, we have evaluated the performance of the long stock strategy during the period from January 1st, 2020, to May 14th, 2024.

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Please note-for trading decisions use the most recent forecast.