Now, it’s time for Coherence, the quantum executive summary, where I take a moment to highlight some of the business impacts we discussed today in case things got too nerdy at times. Let’s recap. After completing a six-month project together, Sam and I coauthored a paper called “Financial Index Tracking via Quantum Computing With Cardinality Constraints.” In the paper, we described a hybrid quantum-classical approach to financial-index tracking portfolios that maximises returns and minimises risk.
Running on D-Wave’s Hybrid Solver, this approach builds investment portfolios that can generate the same financial returns as traditional portfolios with significantly smaller groups of stocks. Replicating financial indexes using a limited subset of assets, known as cardinality constraints, has historically been an extremely difficult challenge for classical computers.
How much smaller were the groups of stocks we used? The number of stocks in the Nasdaq 100 fund was four times smaller than in traditional portfolios and 10 times smaller than the S&P 500 fund. The quantum-built portfolio significantly outperformed the risk profile of the target index by up to 2x. This algorithm can be used for managing ETF funds and reducing overhead costs for financial managers while helping keep fees low for customers.
Multiverse has developed an Excel plug-in that makes it easy for users to run this algorithm without a programming interface. Multiverse also makes a version of its Singularity tool, allowing for more coding flexibility.
That does it for this episode. Thanks to Sam Palmer for joining to discuss this method of portfolio optimisation and Multiverse Computing. Thank you for listening. If you enjoyed the show, please subscribe to Protiviti’s The Post-Quantum World and leave a review to help others find us. Be sure to follow me on Twitter and Instagram @KonstantHacker. You’ll find links there to what we’re doing in Quantum Computing Services at Protiviti. You can also DM me questions or suggestions for what you’d like to hear on the show. For more information on our quantum services, check out Protiviti.com, or follow @ProtivitiTech on Twitter and LinkedIn. Until next time, be kind, and stay quantum curious.