From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training
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Algos in practice
From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training
Algos in practice
- [Instructor] Let's talk about one example of a successful algorithmic trader. Renaissance Technologies is one of the most famous hedge funds pursuing algorithmic trading. Renaissance Technologies or RenTech, as they're more commonly known, gave an example of the type of trade they pursue at one point. The idea is that when skies are cloudy, equity markets tend to perform worse than when skies are clear. That's not just a theory, it's backed up by data, so in theory, you could buy or sell based on data about weather forecasts. Now, practically speaking, it's really hard to trade on weather patterns. They are imprecise and correlations are low. So the correlations between stock prices and weather are low, but in principle, you could use a weather forecast, which is forward looking, and say hey, it's going to be cloudy on Friday, we want to sell stocks in advance then or it's going to be a nice day on Friday, we want to buy stocks in advance then. That's the type of trade that…
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