Hedge Baskets

Learn how to use Boosted.ai Hedge Basket to construct AI-powered hedge baskets.

What is Boosted.ai Hedge Baskets?

Boosted.ai Hedge Baskets is a powerful feature that enables your team to generate intelligent hedges within minutes. We use our proprietary ML technology to construct hedge baskets that offset unique portfolio risks and outperform simple beta hedging. Now, you can own your hedging process without the cost of building a team. 

Hedge Baskets 101


Building a Hedge Baskets Experiment


Hedge Baskets Scenario Settings

  • [Filters] S3 Data Filters - We’ve partnered with S3 to incorporate short interest and borrow data into Hedge Baskets to ensure your hedges are tradable. By default, the machine will only choose stocks whose short interest percentage <=50% and short borrow rate <=10%. You can change this by typing in a new upper or lower bound. 

  • [Basket Trading] Optimizer - You can switch Hedge Method from Simple to Optimizer to optimize your basket to minimize VaR or Volatility. 
  • Basket Trading] Basket Size - Set the number of names in your hedge basket. Generally, larger baskets yield lower volatility but also lower returns. 
  • [Basket Trading] Factor Weightings - You can control the hedge generation process by adjusting the different factor weights used to find similar stocks. 
    • Correlation (Toggle) - When turned on, the portfolio will generate baskets based on return correlations instead of similarity of factor scores.
    • Price Weight (Slider) - How important the price similarity scores generated from Machine Factors are in constructing the baskets.
    • Data Weight (Slider)- How important the data similarity scores generated from ML Model Factors are in constructing the baskets.
    • Factor Weight (Slider) - How important the traditional, non-machine factors are in constructing the baskets.
    • Beta Weight (Slider) - How important beta is in constructing the baskets.
    • ESG Weight (Slider) - How important the ESG factors are in constructing the baskets. Unless your portfolio is ESG sensitive this slider can be set to None however is an option.
    • Signal Importance (Slider) - How important the input signals are in constructing the baskets. This usually has minimal impact on the portfolio generated however is an option.

Evaluating Hedge Baskets Results

  • Click into your experiment to see your hedge baskets. Your hedge basket performances can be shown in absolute values or relative to your baseline portfolio, which you can sort by clicking the top of the column. You can also evaluate all baskets together or within the scenario by switching the toggle between Flat View and Group View.

  • Select a hedge basket to see its construction and its performance against the baseline over time. To do a deeper analysis, you can export your basket as a CSV using the Excel icon or clicking on the model next to your basket’s name. 
  • If your hedge basket is associated with a model, you can click Add to Model to turn your basket into a portfolio. Once your portfolio is turned live, the machine will actively adjust the holdings and weights every rebalance period. 
  • You can rerun any scenarios or add new scenarios to optimize your hedge baskets. 

Log into Boosted Insights to start using Hedge Baskets today. If you have any questions, reach out to your Customer Success Manager.