Market risks identified today

Categories: Neoland-App Dashboard | Web-App Features

Published: 03. June 2021
Written by: Marius Siegert

Your AI in Neoland continuously analyzes the financial markets and automatically detects risks. If a risk is detected, the AI stops trading and only continues trading when there are no more risks. How many risks have already been detected on today's trading day is shown in the dashboard in the display module "Market risks detected today", which you can see in the cover image graphic.

But what are risks? Risks represent particularly strange events for the AI, which lead to so-called anomalies in the data. Fortunately, your AI has developed its own competence to recognize exactly these. Examples of anomalies could be, for example, a sharp increase in trading volume (see Figure 1), large price fluctuations, or rapid price changes. These anomalies represent data that has never or very rarely been observed by the AI. Since the AI, due to the unknown data, estimates for itself that its predictions on the stock market will deteriorate and thus a greater risk arises, it interrupts the trading in your portfolio.

As an example, for the purpose of examining anomalies, the MSCI World is considered on a daily basis in the period from 01.01.2020 - 31.12.2020.

Figure 2: MSCI World ETF: URTH, price development & daily trading volume on the NYSE Arca exchange (1), data from Yahoo Finance, own presentation.

The left Y-axis shows the price of the MSCI World ETF and the right Y-axis shows the trading volume of the ETFs in units on the NYSE Arca exchange. As you can see in the chart, after a strong increase in trading volume (red circles), especially during Corona, there is also usually a strong price fluctuation. These represent a high risk for your portfolio. Your AI recognizes such risks, among others, for you and interrupts trading at the first sign of them. 

So the AI stops trading on your portfolio, but what about the already opened trades? You don't have to worry about them either. As described in the blog article about the trend for the German stock market, the AI follows a strict position management. The open positions are hedged with an automatic sell order and will be sold within 10 trading hours at the latest, based on the analysis of the AI. This way, your portfolio is protected in the best possible way against the risks on the market. 

In conclusion, it can be said that a high or low number of detected market risks is not good or bad. It tells you that your AI permanently keeps an eye on the risk for you and probably also relaxes when the number of detected risks is high.

Sources

  • (1) https://finance.yahoo.com/quote/URTH/history?p=URTH last retrieved on 27.05.2021

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