Hedge Crunch Financial

Over the summer of 2023, hedge fund buying helped to lift crude oil prices. Now that summer is ending, money managers have sold the equivalent of roughly 30 million barrels in petroleum futures.

The oil market has been impacted by production cuts in Russia and Saudi Arabia. Meanwhile, the intense heatwave across the United States caused above average gas consumption as people used their air conditioners to try to keep cool.   

Current predictions anticipate that oil prices will fall as sanctions on oil exports from Iran and Venezuela relax. El Nino could bring a mild winter to the United States, which would limit the gas used for heating homes. According to Reuters, “If temperatures are above the long-term seasonal average, prices will have to remain lower for longer to enforce a corresponding reduction in drilling and production to keep inventories within storage limits.”

Across the world, AI is quickly changing the way people and businesses operate. Now the hedge fund world is finding out if AI can be used to select stocks that will perform well.

Alpesh Patel, CEO of Praefinium, has been using Chat GPT to refine his method for stock selection. Patel conducted several experiments to test whether artificial intelligence could be beneficial in the hedge fund industry. And while he discovered that AI can’t predict which stocks will do well in the future, as reported by Business Insider, Patel did find that AI could “confirm your homework, and tell you something you might otherwise have missed based on the data you imputed…  (and) that getting the prompt right was one of the most critical steps.” 

While basic questions to Chat GBT elicited simple answers, further refining the questions helped the AI to generate more insightful answers. Unfortunately, AI is not the crystal ball we have all been waiting for, but Patel maintains that, “If you are willing to get the data, ask the questions and put it into something like this: you’ve got the stock picks, you’ve got the answers. You can basically replace a fund manager if you want”.

Professionals who work in the world of finance understand that investing in a variety of assets can protect against loss due to market fluctuation, increasing the likelihood of favorable outcomes. Scientists who study coral reefs are now applying this kind of hedge fund thinking to determine how best to help coral reefs survive climate change.  

The Great Barrier Reef of Australia has been heavily damaged by rising ocean temperatures. If climate change continues, much of the coral will die out. Scientists are now in a race to save as much of the reef as possible. However, with more than 600 species of coral in the Great Barrier Reef, researchers with limited funding are unable to save them all. They must now figure out which types of coral are best suited to survive in the warming ocean and put all their efforts into protecting them. Coral geneticist Madeline van Oppen explained, “If a program only has funds to focus on 20 or 30 coral species, it will want to focus on the sets of species to get the most ecosystem bang for its buck”.

The researchers developed a two-pronged approach that determined which corals were most likely to survive, while also collecting and cataloging a variety of corals that are necessary to the overall functioning of the reef ecosystem. By comparing these lists, they narrowed the 600 species of coral down to 11 corals that are most likely to both endure and to provide ecological benefit in the future. By diversifying their approach and hedging their bets, these scientists have refined their approach to saving the reef.