QuantRocket Blog

Extracting Structured Datasets for Systematic Strategies from Unstructured Textual Sources: Brain Alternative Datasets

Francesco Cricchio and Matteo Campellone — Thu, 11 Jul 2024 00:00:00 GMT

Natural Language Processing (NLP) is a broad field that enables computers to process and analyze unstructured textual data. In this article, we present several proprietary Brain datasets derived from news articles and SEC regulatory filings, along with case studies implemented in QuantRocket.

Is There Alpha in Borrow Fees?

QuantRocket — Thu, 16 May 2024 00:00:00 GMT

Borrow fees reflect how likely short sellers think a stock is to decline. Can this information be incorporated into trading strategies as an alpha factor? This article uses Alphalens to explore the relationship between borrow fees and forward returns and uses Moonshot and Zipline to demonstrate ways to incorporate borrow fees into long or short strategies.

Cloud or Local: Where to Run Your Quant Trading?

QuantRocket — Wed, 29 Nov 2023 00:00:00 GMT

Is it better to run your quant trading in the cloud or locally? In this article, I outline the pros and cons of each approach and explain why running locally is often better for research while running in the cloud is better for live trading.

Market Cap vs Dollar Volume: Which to Use for Universe Selection?

QuantRocket — Fri, 20 Oct 2023 00:00:00 GMT

Market cap and dollar volume are two commonly used metrics for filtering a trading universe by size of security. Does it matter which one you use? In this post, I quantify the difference between market cap and dollar volume and explain the kinds of stocks that may unexpectedly appear in your universe with each metric.

Researching the Quality Factor with Alphalens and Zipline

QuantRocket — Thu, 28 Sep 2023 00:00:00 GMT

Buying high-quality stocks and avoiding low-quality ones can improve investment returns. In this post, I use Alphalens and Zipline to analyze the Piotroski F-Score, a composite measure of a firm's financial health and quality.

Financial Distress Factors: the Altman Z-Score and Interest Coverage Ratio

QuantRocket — Thu, 07 Sep 2023 00:00:00 GMT

Are rising interest rates straining balance sheets and increasing the risk of bankruptcies? This article investigates two financial distress factors, the Altman Z-Score and interest coverage ratio, to see if distress is on the rise and how it impacts stock returns.

Sector Neutralization: Why It Matters and How to Use It

QuantRocket — Tue, 22 Aug 2023 00:00:00 GMT

Sector neutralization is a technique to hedge out sector bets and reduce the impact of sector-specific risks on the portfolio by ranking factors within sectors rather than across sectors. This post uses the debt-to-equity ratio to show why sector neutralization is important and how to perform it in Pipeline.

Why Backtests Run Fast or Slow: A Comparison of Zipline, Moonshot, and Lean

QuantRocket — Mon, 31 Jul 2023 00:00:00 GMT

Backtest speed can significantly affect research friction. The ability to form a hypothesis and quickly get an answer from a backtest allows you to investigate more hypotheses. In this article, I explore several factors that affect backtest speed and compare the performance of 3 open-source backtesters.

What's Better, High Profit Margins or Improving Profit Margins?

QuantRocket — Thu, 13 Jul 2023 00:00:00 GMT

Should investors prefer companies with high profit margins or companies with improving profit margins? Is it better to own an unprofitable company that's getting better, or a profitable company that's getting worse? This post explores these questions by analyzing the profitability growth factor and how it interacts with the profitability and size factors to impact stock performance.

Analyzing the Profitability Factor with Alphalens

QuantRocket — Wed, 28 Jun 2023 00:00:00 GMT

How does a company's profitability affect its stock returns? In this post, I use Alphalens, a Python library for analyzing alpha factors, to investigate the relationship between operating margin, a profitability ratio, and future returns.

Exploratory Data Analysis of Fundamental Factors

QuantRocket — Thu, 15 Jun 2023 00:00:00 GMT

When researching fundamental factors, analyzing alpha shouldn't be your first step. You can save time and spot issues early by starting with a basic exploration of your factor's distribution and statistical properties, a process known as exploratory data analysis (EDA). This post looks at operating margin, a profitability ratio, to demonstrate what you can learn from exploratory data analysis.

How Python Type Hints Make Coding Easier

QuantRocket — Thu, 01 Jun 2023 00:00:00 GMT

You may have heard about Python type hints and wondered whether they're relevant to quants or only to professional software developers. In this article, I'll explain how QuantRocket's JupyterLab environment uses type hints to enable better auto-complete and in-editor documentation, and I'll explain when quants should use type hints in their own code.

QuantConnect and the Financial Challenges of Democratizing Finance

QuantRocket — Wed, 09 Nov 2022 00:00:00 GMT

QuantConnect, a quantitative backtesting and trading platform serving mostly retail traders, recently announced a crowdfunding campaign seeking to raise money from its community of users. The company's associated regulatory disclosures (required by the SEC for equity crowdfunding offerings) reveal that the fundraising is a matter of survival. In this article, I explore what QuantConnect's financial statements reveal about the retail quant trading market.

What Comes After a Dead Cat Bounce?

QuantRocket — Wed, 02 Dec 2020 00:00:00 GMT

What happens after stocks suffer large one-day losses? This post finds that the proverbial "dead cat bounce" occurs overnight and is followed by continued losses the next day. Targeting international markets, I explore a trading strategy that aims to profit from the losses that follow a dead cat bounce.

A Primer on Survivorship Bias

QuantRocket — Thu, 19 Nov 2020 00:00:00 GMT

What is survivorship bias, and why should you care about it? This post explains how survivorship bias can trick you into drawing faulty conclusions from your research, and what you need to know to avoid being tricked.

3 Takeaways from Quantopian Shutting Down

QuantRocket — Thu, 05 Nov 2020 00:00:00 GMT

Quantopian announced that it is shutting down its community platform. This doesn’t entirely come as a surprise.

Should You Buy or Sell Stocks that Gap Down?

QuantRocket — Thu, 03 Sep 2020 00:00:00 GMT

What happens when strong stocks gap down at the open? A well-known trading strategy is to buy the gap, expecting mean reversion. This post uses Zipline to explore down gaps and finds a profitable strategy based on selling, not buying, the gap.

Intraday Futures Calendar Spreads and the Impact of Transaction Costs

QuantRocket — Wed, 25 Sep 2019 00:00:00 GMT

Intraday trading strategies offer great promise as well as great peril. This post explores an intraday trading strategy for crude oil calendar spreads and highlights the impact of transaction costs on its profitability.

Is Pairs Trading Still Viable?

QuantRocket — Fri, 30 Aug 2019 00:00:00 GMT

Classic pairs trading strategies have suffered deteriorating returns over time. Can a research pipeline that facilitates the identification and selection of ETF pairs make pairs trading viable again? This post investigates such a pipeline.

Hedging Long-Term Risk with an Intraday Strategy

QuantRocket — Tue, 19 Mar 2019 00:00:00 GMT

Do intraday strategies have a place in the portfolios of long-term investors and fund managers? This post explores an intraday strategy that works best in high volatility regimes and thus makes an attractive candidate for hedging long-term portfolio risk.