What it does
The platform is given a universe of investable assets, and it uses factor-based investment strategies to identify and invest in ethical assets. We rank the ethics of each company using ESG variables and use fundamental factors (such as debt) as signals for our investment. The platform also minimises risk by shuffling the portfolio to be market-neutral.
How we built it
Our first goal was to get a functional ethical trading system up and running while we determined the trading strategy to follow. This involved parsing daily historical price datasets for 3 instruments, which included the S&P 500 as a baseline, and an instrument to short and one to go long. After parsing and loading the data into memory, we calculated the long/short instrument beta's against the S&P 500 and used these values to set the quantities to trading for each of these instruments. The system was structured and developed using Petra, a new embedded Java 8 DSL which aims to make it easier to structure, scale and verify complex software systems.
Challenges we ran into
It was challenging to learn about factor-based trading whilst being required to develop a systematic trading engine to execute our strategy. We also encountered the missing data problem which is a common problem in factors investing.
Accomplishments that we're proud of
We all worked together so well as a team under the hackathon time pressure, I was really impressed, especially with the 1st years in our team. I feel we were actually able to hack together the start of a little ethical hedge fund.
What we learned
Gathering financial data for all of the companies we researched is a difficult process as it is provided in different formats with varying time intervals. As for the implementation, we had to quickly pick up the Petra DSL to create a working solution in java. We also improved our knowledge of version control via collaborating in Github.
What's next for Ethical Investment Platform
We are looking to expand our investment universe and portfolio size to reduce risks further. In addition, we will include additional factors to use as signals in hope of making the platform more profitable. Lastly, we will look at including market-execution strategies to identify better timings to enter and exit the market, when all fees and spreads are considered.
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