November 29, 2022

Financial returns take a step forward with Quantum annealed portfolios. Quantum Finance creating financial advantage?


In the quest to generate returns in challenging market conditions, many banks have been looking at utilising quantum computing to provide a financial return on portfolio optimization that can embody high return and low-risk portfolios. Researchers from Multiverse Computing, Protiviti and Ally Financial show how financial experts and advisors can use quantum annealers to solve practical problems such as portfolio optimization published in a paper named: “Financial Index Tracking via Quantum Computing with Cardinality Constraints.

Less Risk, More Return

The team have managed to build portfolios of stocks that have fewer stocks in the portfolio. This is important for several reasons. Namely, one can have less cost with a smaller number of stocks because the trading fees are less, and of course, there are fewer stocks to monitor. In addition, Protiviti working with Ally Financial, a leader in digital financial services, has released a study demonstrating how a Quantum algorithm run on a quantum annealing system can optimize investment portfolios automatically with returns that match traditional portfolios. The published article about the study, titled “Financial Index Tracking via Quantum Computing with Cardinality Constraints”, can be seen here.

Stock picking with Quantum Computers

Building upon previous hybrid classical-quantum approaches, the researchers built investment portfolios for equities in the Nasdaq 100 and the S&P 500 and used daily returns for a year. The aim was to use the algorithm to create investment portfolios that can generate similar financial returns as classical (conventional) portfolios with a much smaller range of stocks; this problem has been typically complicated. Multiverse Computing has been supplying much of the critical Quantum Computing talent and has previously been active in the quantum financial space to assist financiers in building strategies in the finance space that convert quantum advantage into financial advantage.

Multiverse and partners are not the only companies to be involved the space of stock picking. Chicago quantum (see our past interview) have been offering a service to end users to help them optimize their portfolios. The work with Multiverse and Ally will offer perhaps more an institutional push into Quantum finance.

Please find the article by Quantum Zeitgeist here