Stock Investing via Quantitative Strategies

Nitin Agrawal
Nitin Agrawal

Quantitative strategies involve creating a portfolio of stocks using set rules, which are framed based on well-established principles of finance.

A vast majority of investors believe that Market Beta and Manager Alpha drive the portfolio returns. However, recent research has shown that a large part of Manager Alpha can be systemically explained by following algorithmic strategies, which are uncorrelated to each other. These strategies are often referred to as Risk Premia Strategies or Smart Beta Strategies. Some of the examples of Risk Premia strategies would be a Value Strategy (investing in companies, which are undervalued) or say a Momentum Strategy (investing in companies who have recently performed well).

At OroStocks, we have analyzed over 10 million data points to build a robust model to identify Value Stocks and Momentum Stocks. This model, which is typically available to only institutional investors, has been developed by us to build two Smart Beta strategies – OroMomentum and OroValue.

By investing in these strategies, retail investors can avoid committing the following investing mistakes:

1) Investing in single name vs a portfolio of stocks    

Stocks are volatile. Diversification helps in giving better risk-adjusted return vs. taking a bet on a single name

2) Following a hot tip vs. following a systematic model-based approach:

A Systematic model based investing takes emotions out of investing and saves us against various cognitive biases. For e.g. holding on to loss-making investments and selling the profit-making stocks early

3) When to sell and when to hold on:

Investing is not just equivalent to buying the stock. Knowing when to sell it is as important if not more. Blindly following star fund managers and buying stocks based on what they have bought in recent past is a recipe for disaster. If say, Rakesh Jhunjhunwala buys Infosys today, a lot of retail investors would start buying that stock. What we don’t know is when is he going to sell it or what portion of his entire portfolio he has committed to it. It may very well be a case of him hedging some other position. For e.g. Short NIFTY 50 future and buy Infosys.

OroStocks can offer a way to make superior risk-adjusted returns while following a systematic approach. Do try it out and let us know your feedback.

Nitin Agrawal
Nitin Agrawal

Nitin is the Co-founder and CEO at Orowealth and has worked at Deutsche Bank for 6 years in Equity Structuring across their London and Singapore offices. He is a MBA from IIM Bangalore and has a degree in Electrical Engineering from IIT Bombay.

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