Quantamental investing is a hybrid investment method that uses quantamental strategies to allocate investment capital.
Quantamental strategies, also known as “quantitative fundamental” strategies, are investment approaches that combine the use of quantitative analysis with fundamental analysis to make investment decisions. These have been gaining popularity in recent years and have been particularly successful in the cryptocurrency market, where prices are often driven by a mix of technological innovations, speculation, and regulatory developments.
Let’s give a look to the two approaches to understand how they are applied together.
Quantitative analysis
Quantitative analysis uses mathematical and statistical models to analyse historical market data and identify patterns and trends to make predictions about future market behaviour. It involves the use of advanced computational tools to examine large data sets and to develop predictive models on which investment decisions could be based.
Overall, quantitative analysis is applied to identify opportunities and make investment decisions based on data-driven analysis rather than subjective judgments.
Quantitative analysis provides the backbone of quantamental investing.
Fundamental analysis
Fundamental analysis is then used to evaluate the investment opportunities identified by quantitative analysis.
Fundamental analysis is a method of evaluating the intrinsic value of a security or investment by examining various factors related to the underlying asset, such as a company’s financial statements, industry trends, management, and economic conditions. The purpose is to determine whether an asset is undervalued or overvalued, and whether it presents a good investment opportunity.
Fundamental analysis is often used in conjunction with other forms of analysis, such as technical analysis and, as previously mentioned, quantitative analysis, to gain a more comprehensive view of the investment landscape.
In other words, quantamental investing approach combines the quantitative analysis of large data sets with the qualitative analysis of underlying business or asset fundamentals, this hybrid structure seeks to leverage the strengths of both quantitative and fundamental analysis, aiming to identify opportunities that may be missed by purely quantitative or fundamental analysis alone and generate better investment outcomes. It is used by a variety of investors, including hedge funds, mutual funds, and other institutional investors, who seek to gain a competitive edge in the financial markets.
Focus on crypto hedge funds
Quantamental investing has gained significant traction in the world of hedge funds, including those that focus on the world of cryptocurrencies.
Crypto hedge funds have been some of the early adopters of quantamental strategies in the financial industry: these strategies are a powerful tool and can be widely applied to crypto hedge funds to generate returns in the highly volatile, dynamic and rapidly evolving cryptocurrency markets. Cryptocurrencies present unique challenges for investors, including limited historical data, complex market dynamics, and high volatility. The hybrid nature of quantamental investing makes it particularly suitable for the cryptocurrency market, as it can provide an effective way to navigate these challenges and generate returns.
With the ever-increasing availability of big data and the development of sophisticated algorithms, quantitative analysis has become an essential tool for investors seeking to gain an edge in the crypto markets, while also incorporating traditional fundamental analysis to assess a project’s potential for growth and adoption.
As the crypto market continues to evolve and become more sophisticated, it is likely that quantamental investing will become an even more essential tool for investors seeking to generate above-average performance in this asset class.
With regard to this type of investment strategy, it is interesting to note the activity of Senda Digital Assets, a crypto hedge fund that proposes the quantamental strategy as an approach to reach the set goals.
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