S&P 500 Forecast: Evaluating the Stock Market Predictions Hit Ratio for Long Term Model and Short Term Model
Evaluation S&P 500 Forecast Executive Summary
In this forecast evaluation report, we examine the performance of the S&P 500 forecast generated by the I Know First AI Algorithms for the long term model with time horizons ranging from 3 days to 3 months and additionally we are showing the performance of our short term model with time horizons ranging from 1 day to 6 days, available for institutional clients. Our analysis covers the time period from January 1st, 2019 to October 9th, 2019. Below, we present our key takeaways for checking hit ratios of our stock market predictions.
Highlights
- 77% Hit ratio for 3 months’ time period of S&P 500 predictions allowing our clients to be able to invest their money with significant less risk.
- Short term model more accurate than long term model for the 3 days predictions.
- 69% Hit ratio for 4 days’ time period of S&P 500 predictions for the short term model.
Note that the above results were obtained as a result of an evaluation conducted over the specific time period to give a presentation for the S&P 500 movements. The following report provides an extensive explanation of our methodology and detailed analysis of the performance metrics that we obtained during the evaluation. This report is a new I Know First evaluation series illustrating the ability to provide successful forecast on the S&P 500 Index.
About the I Know First Algorithm
The I Know First self-learning algorithm analyses, models, and provides stock market predictions for the capital markets, including stocks, bonds, currencies, commodities and interest rates. The algorithm is based on Artificial Intelligence (AI) and Machine Learning (ML) and incorporates elements of Artificial Neural Networks and Genetic Algorithms.
The system outputs the predicted trend as a number, positive or negative, along with a wave chart that predicts how the waves will overlap with the predicted trend. Consequently, the trader can decide which direction to trade, when to enter the trade, and when to exit the trade. The model is 100% empirical, based only on factual data, thereby avoiding any biases or emotions that may accompany human assumptions. I Know First’s model only involves the human factor in building the mathematical framework and providing the initial set of inputs and outputs to the system. The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions.
Our algorithm provides two independent indicators for the index – signal and predictability.
The signal is the predicted strength and direction of movement of the index. This is measured from –inf to +inf.
The predictability indicates our confidence in the signal. The predictability is a Pearson correlation coefficient relating to past algorithmic performance and actual market movement, measured from -1 to 1. You can find a detailed description of our heatmap here.
The Hit Ratio Calculation
The hit ratio helps us to identify the accuracy of our algorithm’s predictions.
We predict the direction of movement of the S&P 500 Index using our algorithm. Our predictions are then compared against actual movements of the S&P 500 within the same time horizon.
The hit ratio is then calculated as follows:
S&P 500 Index Composition
When thinking of index funds as benchmarks for the whole economy, many experts tend to gravitate towards checking the S&P 500. This prominent index, followed by millions throughout the globe, has historically shined a light on the movements in the stock market. What the index does, in essence, is choose the 500 largest publicly traded companies by order of market capitalization and produces a quarterly list of corporations to be tracked. It is clear that any preemptive indication of how those shares appreciate or depreciate could be a powerful and highly profitable tool for investors.
Evaluating Long Term Model and Short Term Model Hit Ratios
The S&P 500 forecast is generated by the I Know First AI Algorithms for the long term model which covers time horizons ranging from 3 days to 1 year and it’s available for institutions and individual investors. Additionally, we are generating AI predictions for the short term model which covers time horizons ranging from 1 day to 6 days. This model is available only for institutional clients. The algorithm generates predictions independently for both models and for each time horizon.
Through the results above, you can see that we at I Know First with both models that can consistently predict the S&P 500 throughout various time periods. For the long term model, on average through 2019, has achieved the incredible feat of hitting the S&P 500’s exact movement 77% of the time for the 3 months prediction time horizon. This, in essence, means that the algorithm will be correct more than 3 out of 4 times on the 3 months’ time horizon allowing our clients to make the safest investments. Additionally, the 7-day, 14-day and one-month time horizons have also a high hit ratio on the past 9 months with 59%, 65% and 66% accuracy respectively.
The short term model show us good results as well. For the 4 days’ time horizon the hit ratio was 69% for the prediction of the S&P 500 index. In addition, you can see that the short term model is more accurate for the 3 days’ time horizon than the long term model by 8%. For the 2 days’ time period to the 6 days’ time period the model has a hit ratio above 60% for the predictions of the S&P 500 index over the last 9 months.
These 2 models allow our investors to have a safer outlook for long and short term when investing despite these volatile time periods.
Conclusion
All in all, we at I Know First have a mission to provide our clients with the best information about the future. By sharpening our abilities to predict the S&P 500 through our incredible Artificial Intelligence system, we provide our clients with increasing certainty that their investment will be safer and more profitable. Within the bounds of certainty, we have consistently been able to find that we can predict the S&P 500 movements above 60% of the time over the last 9 months in long and short time horizons. The peak for the long term model is the 77% hit ratio over the 3 months’ time horizon rendering our services can predict the movement correctly more than 3 out of 4 times on average. Finally, we have a 69% hit ratio over the 4 days’ time horizon for the short term model, providing accurate predictions for short term investors.
