QI, Predata Ally to Create Predictive Macro Analytics

Developed over six years, Quant Insight’s platform incorporates millions of financial data points to create a holistic view of the driving forces behind the price of a particular asset. The platform reduces the complexity of the market by creating a simplified view of how market forces are connected, which allows investors to develop and alter their investment strategies based on the research. 

Huw Roberts, head of fixed income at Quant Insight, says the vendor looks for macro factors from a variety of public and private sources, covering economic growth, inflation expectations, commodity prices, credit spreads, and various proxies for critical macroeconomic themes like stress in the EuroZone periphery, and quantitative easing expectations. “The data is pulled into the QI models and then presented in a clear, easy-to-understand format which helps deliver actionable ideas to the client base,” Roberts says.

QI gathers data on more than 3,000 instruments from independent pricing sources, covering equities, interest-rate products, currencies, commodities, and credit for clients to identify macro drivers, create valuation gaps, and run scenario analysis.

“QI can analyze the macro stories impacting financial markets. Increasingly, geo-politics is an important variable that impacts stock markets, currencies etc. Traditionally that was true predominantly in emerging markets, but politics is playing a bigger role in developed markets. By marrying QI’s macro expertise with Predata’s geopolitical risk signals, investors have a one-stop-shop for identifying and analyzing a broad picture of the risks impacting financial markets,” Roberts says.

Established in 2014 in New York, Predata uses algorithms to identify web browsing patterns in order to understand human behavior and anticipate global events by reviewing and gathering data from public APIs, such as unique page visits on Wikipedia pages or variations in views of YouTube videos. According to Predata, that information offers a glimpse of how world events –and individuals’ reactions to them—could impact financial markets.

“A lot of alternative analytics out there analyze social media, which gives them an edge by knowing the news prior to the others, but they wait for the news to happen,” says Predata CEO Hazem Dawani. “We are able to anticipate the events that are going to happen seven to 30 days in advance. We also give our clients the likelihood of an event happening—with 80 percent or 60 percent probability, for example—so they can make a decision if it will affect their positions, or if they need to hedge or take on more aggressive trading positions.”

Predata’s predictive evaluations allow firms to correlate an event to their holdings in a particular asset class, which can give firms a competitive advantage when assessing the impact of an event on their market positions.

“We think we’re onto something big here, and that it will be something really sought after by every macro and global macro head, hedge fund managers and commodity traders. Also, we’re getting better at our predictions as time goes on, and our algorithms are getting smarter,” and as the vendor improves accuracy by identifying the best sources of data to support its predictions, Dawani says.