Artificial Intelligence Equity arbitrage

Based on Innolab’s proprietary artificial intelligence platform

The investment strategy

The low risk equity arbitrage investment strategy is based on Innolab’s AI Research and Analysis module.

The strategy demonstrates several attractive attributes:

  • Security selection is based on arbitrage pairs with a long/short position that significantly reduce the risk for each selection.

  • Stable single digit returns (negative returns are possible).

  • Independent of equity market development.

  • Significantly scalable by AUM.

  • Very diversified portfolio.

Artificial Intelligence Equity Arbitrage 1

The features

The investment universe consists of +50 European sector and worldwide country equity indices and is based on highly liquid futures. Inefficiencies are exploited through arbitrage pairs positions, where each position has the same expected risk based on volatility measurement. The arbitrage pairs are selected based on:

  • A 3-month horizon.
  • Prediction of asset development.
  • Correlation between assets.
  • Innolab proprietary confidence spread score of minimum 12 points.
  • A correlation of 67%.
  • The portfolio holds 130 pairs on average with a leverage of approximately 130%.
  • All pairs are continuously monitored.

If the return exceeds the fixed stop loss or take profit settings it is liquidated. After three months the pair is re-evaluated. If the inefficiency still exists, the pair is rebalanced, otherwise it is liquidated. The risk of the total portfolio is constantly measured.