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Visual Guide to Hedge Funds by Richard Wilson

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CHAPTER 10 Quantitative and Algorithmic Trading Strategies

Quantitative trading is an investment strategy that relies on mathematical formulas and price action to recognize trading opportunities. These types of strategies can be as simple as analyzing the “dogs of the Dow, ” which look for the 10 worst-performing Dow stocks from the prior year, to statistical arbitrage, which looks at covariance matrices to determine the best-performing portfolio.

Algorithmic trading strategies are systematic strategies that can use quantitative investment approaches to generate investment returns. The two concepts are similar with quantitative strategies focusing on the research end of the investment process and algorithms evaluating the execution end of ...

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