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.”
“Together, we have broken new ground, advancing a quantum-based solution to a portfolio optimization problem that remains challenging for classical computers. As quantum hardware performance improves, there will be increased opportunities to provide even better returns with less market risk,”
Ally Financial’s Chief Information, Data and Digital Officer Sathish Muthukrishnan
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.
“I’m proud of the quantum team in continuing to explore various use cases that benefit our customers and help Ally to see around corners.”
Ally Financial’s Chief Information, Data and Digital Officer Sathish Muthukrishnan
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.
About the partners
Protiviti ( www.protiviti.com ) is a global consulting firm that delivers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders confidently face the future. Protiviti and its independent and locally owned Member Firms provide clients with consulting and managed solutions in finance, technology, operations, data, digital, legal, governance, risk and internal audit through its network of more than 85 offices in over 25 countries. Named to the 2022 Fortune 100 Best Companies to Work For ® list, Protiviti has served more than 80 per cent of Fortune 100 and nearly 80 per cent of Fortune 500 companies. The firm also works with smaller, growing companies, including those looking to go public and with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948, Robert Half is a member of the S&P 500 index.
Multiverse Computing is a leading quantum software company that applies quantum and quantum-inspired solutions to tackle complex problems to deliver value today and enable a more resilient and prosperous economy. The company’s expertise in quantum algorithms and quantum-inspired algorithms means it can secure maximum results from current quantum devices as well as classical high performance computers. Singularity’s flagship product allows professionals across all industries to leverage quantum computing with common software tools. The company serves companies in the finance, mobility, energy, life sciences and advanced manufacturing verticals.
“Financial managers can use the algorithm today to meet specific investing goals or other customized requirements for clients,”
Mehdi Bozzo-Rey, Chief Revenue Officer at Multiverse Computing.