AI in Stock Market Investing: How to Track Healthy Investments

Artificial Intelligence is an expanding field in the world today. It has been applied to areas such as autonomous driving, healthcare, sports, and more. Furthermore, many people are planning to study some form of software or engineering, and they must make their skillset more versatile. A more versatile skill set will ensure that you can be considered for more jobs and that your abilities cater to current projects instead of old-fashioned ones. With that being said, let’s see how AI can be used in finance, and more explicitly, stock market investing.

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Removing Bias from Data Sets

Working with analytics has one requirement that people often cannot meet: no emotion. Data does not regard how we think and act; it presents the truth with nothing in between. But how is it possible to stop from forming opinions, judgments, and taking sides? After all, it is what makes us human. Enter artificial intelligence.

WHAT IS THE DIFFERENCE BETWEEN CORPORATE AND GOVERNMENT FINANCE?

Finance is a great way to use artificial intelligence since it has a significant association with looking at data. Corporate finance uses data to research competitors and evaluates whether to turn an idea into action. Government finance has become an increasingly relevant topic since deciding where stimulus checks and loans would be sent was very important during the pandemic. Personal finance, such as the stock market, has been around for hundreds of years. Investing uses a series of numbers and ratios to analyze stocks and the businesses behind these stocks.

EVALUATING BUSINESS FINANCIALS

When someone wants to evaluate a business, what should they look at? Businesses can be broken down into a group of stats and numbers provided from financial documents. Different numbers and ratios can be derived from these financial numbers to compare businesses to each other and ultimately pick the best one. However, looking at many companies and locating and then calculating numbers and ratios for them gets tedious, and it takes away time that you may not have. Therefore, a model must be created in which you can pass in many different stocks. This model would have the power to read the financial statements and give feedback on whether they are up to par or not. This is just one of many application of AI in Stock Market investing.

Applying AI to Financial Data Sets

First, this model would have to be trained with a sample data set, which must provide a large amount of data to train the model properly. The confusion matrix that uses recall, F-1 Score, accuracy, and precision can be used to make sure that the model is accurate.

Once the model has been trained, parameters can start to be inputted. We only want to consider the businesses that have their numbers meet our threshold. This means marking stocks as under this threshold as not good investments. Even if some numbers meet the threshold, the model needs to keep going to test out all of the types of ratios of that business since just one unsatisfactory ratio could cause a great-looking investment to turn into a poor one. This is where the concept of getting rid of emotion comes in since the model will prevent you from “jumping the gun” and disregarding important information. The data can either be put in text form or make graphs for the output, such as linear regression or clustering.

Upon making this model, you will have a way to track healthy investments and show something unique about your skillset. I hope that this will enhance your coding and financial experience.