Getting Capital Allocations from Quantopian
Anyone with some coding skill and a mind for finance can be successful. All you need are good ideas, and we'll provide good tools.
How this works

1. You use our platform to create investment algorithms.

2. We evaluate your algorithms, and selected authors receive an offer to license their algorithm.

3. When a selected algorithm generates positive returns, the author gets a cut.

Our job is to raise the capital, handle all day-to-day trading operations, provide useful data sets, and build the best platform in the world for creating investment strategies.

Your compensation

If your algorithm receives an allocation, we will pay you a share of the returns that your algorithm earns on our capital. Our target is to pay you 10% of the net profit on your algorithm's allocation.

Allocation Sizes

Quantopian allocates capital from external investors to select algorithms written by our community members (hopefully including you!). Starting allocations average approximately $5 million per algorithm and vary by each algorithm's expected trading capacity and performance. We hope to eventually allocate as much as $50 million to a single algorithm.

Our compensation structure has benefits that you won't find in most other quant compensation.
You will always own your intellectual property. At other firms, your algorithms become the property of the firm.
You don't have to manage the algorithm operations, chained to your desk every day. We will operate the algorithm for you.
You don't have to pay for the platform, pricing data, or corporate fundamental data.
You aren't responsible for raising trading capital. Quantopian will provide it for you.
You will be paid a share of your algorithm's positive returns, regardless of other algorithm writers' performance.
Our tools and data are world-class. Our open-source platform is built with the help and guidance of experts world-wide.
Our process

We are building a portfolio of uncorrelated investments. Financial theory, backed by evidence in practice, shows the benefits of aggregating a large number of uncorrelated returns streams. The key is that the algorithms should be uncorrelated.

With rare exceptions described in our Terms of Use, we don't look at your algorithm code. But we do look at some of the information that comes out of your backtest. We look at things like your performance, your risk metrics, how many securities you trade, how often you trade, and what the size of your positions are.

What we look for
Consistent Profitability
We are looking for uncorrelated algorithms that show stable profits. If your algorithm makes money while managing risk exposures and avoiding long drawdown periods, it might be a great addition to our portfolio. We are looking for algorithms that consistently have a Sharpe ratio over 1.0.
Actively Trading Algorithms
Your algorithm has to actively trade. We measure that by looking at how often your portfolio turns over per year. This is important because we need your algorithm to be predictable. Our algorithm selection model only works if we have sufficient data to analyze about your algorithm. Algorithms that rebalance or trade very infrequently are difficult to model with limited historical data. We are looking for algorithms that turn over their portfolio between 12 and 500 times per year (e.g between once per month and twice a day).
Risk Management
We want algorithms that deliberately manage exposures to commonly understood risk factors. Some examples of sources of risk are market risk, sector risk, style risk, and single stock risk. In order to help you manage your algorithm’s exposure to common market, sector, and style factors, Quantopian provides you with use of a US Equity risk model for free. Learn more about the risk model and how to use it in your research and algorithm development.
Low Exposure to Market Risk
We want algorithms that aren't correlated to the rest of the stock market. This is often referred to as "beta neutral" or "dollar neutral." If your algorithm is correlated with the rest of the stock market, the algorithm isn't providing any quality different from buying a market index. As a practical matter this means that we're looking for algorithms that have a strong hedging component, or are completely hedged at all times. We measure market exposure by calculating your beta to the S&P 500. We are looking for algorithms with a market beta between -0.3 and +0.3.
Low Exposure to Sector Risk
We want algorithms that limit their exposure to any single stock market sector. While there are valid strategies that may be confined to one of a few sectors, or that specifically seek to predict and profit off of differences in performance across sectors, in all other cases we are looking for algorithms to limit their sector exposure. As a rule of thumb, we are looking for algorithms that seek to limit their maximum exposure to any single sector to less than 10%, and ideally target an average exposure of as close to 0% as possible.
Low Exposure to Style Risk
We want algorithms that limit their exposure to well-known investment styles such as investing in small market capitalization companies over large companies. There are five investing styles we track: size, value, momentum, short-term reversal, and volatility. While there are valid strategies that exploit consistent exposures to these investment styles, we are looking for algorithms that limit their exposure as much as possible and seek to exploit novel relationships in the market to achieve consistent profits. As a rule of thumb we prefer algorithms that limit their maximum exposure to any single style to less than 20%, and ideally target an average exposure of as close to 0% as possible.
Low Exposure to Single Stock Risk
We want algorithms that limit their exposure to any single stock. Unpredictable, idiosyncratic events such as an acquisition event, a key management team change, or an earnings surprise can result in large price movements and are often not captured by quantitative models. As a rough approximation, we are looking for algorithms that limit their single stock exposure to 10% of their portfolio value or less at any given time.
Low Correlation to Peers
Your algorithm must generate a returns stream that has low correlation with other algorithms we select. We measure correlation by looking at your average pairwise correlation with the rest of the algorithms in the pool. We prefer that average to be between -30% and +30% average pairwise correlation with the other algorithms in our portfolio.
Strategic Intent
We are looking for algorithms that are driven by underlying economic reasoning. Examples of economic reasoning could be a supply and demand imbalance, a mixture of technical and fundamental drivers of stock price or a structural mispricing between an index ETF and its constituent stocks.
High Capacity
We want algorithms that perform well even when trading at capacity levels typically backed by institutional capital (from $1 million to $100+ million). Capacity refers to the amount of trading capital an algorithm can manage while still generating an acceptable level of profit. A good way to check if your algorithm has high capacity is to backtest it with our default slippage models at increasing levels of starting capital and look at how the profits are affected. Low capacity algorithms will see rapidly declining performance at higher capital levels.
What we don't want
In the pursuit of a good algorithm, sometimes a writer will overfit the algorithm to the test data set, only to see poor performance on live data. Good practice is to minimize the number of parameters in your model, constrain your parameter search space, and develop your algorithm using a limited data set (in-sample data), followed by cross-validation testing on the rest of the data, the out-of-sample.
Data snooping
Some algorithms, either unintentionally or by design, rely on future information to be profitable. Our tools and data sets are built to prevent this bias from entering your algorithm, but algorithm writers still need to take care. One common form of data snooping is survivorship bias, where the strategy works only on a set of companies that are large and successful today, like Apple, Google and Amazon. Another common error is look-ahead bias, where the strategy incorporates external data into a backtest earlier than it would actually have been available in live trading.
Spurious correlations
If there is no economic underpinning linking the algorithm's signal and its profits, this should be a warning sign. When you don't know why your algorithm works, it is difficult to have confidence about its future behavior.
Infringing or misappropriated content
You should not post or use any copyrightable or trade secret materials or any other protected intellectual property of others (other than Shared Content), including any proprietary materials of your current or past employer, without getting any necessary consents or approvals in advance. For more information, please see our Terms of Use.

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

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