Quantum annealing (QA) has emerged as an effective way to find the optimal solution using a large dataset. While this has applications in an endless variety of use cases, its application in the realm of finance may be one of the fastest ways for researchers to realize a significant ROI in their annealing work.
Yao-Hsin Chou, Ching-Hsuan Wu, Pei-Shin Huang, Jyun-Yi Shen, of National Chi Nan University, Department of Computer Science and Information Engineering, Shu-Yu Kuo, Sy-Yen Kuo, of the National Taiwan University, Department of Electrical Engineering, and Ching-Ray Chang of Christian University, Department of Physics, recently explored ways to use quantum annealing to enhance the management of international stock portfolios.
What Is Quantum Annealing?
Quantum annealing uses quantum properties to determine an optimal solution. Since the qubits in quantum computers, unlike traditional computing algorithms, have the quality of superposition, they can explore many possibilities simultaneously. Superposition is a quality that allows a quantum particle to exist in multiple states — and be in multiple places — at the same time. This gives a quantum annealing computer the ability to identify optimal solutions very quickly because it can evaluate many possibilities simultaneously.
Also, thanks to quantum tunneling, quantum annealing is far less likely to prematurely identify a “good” instead of an “excellent” solution. A quantum annealing computer can examine many solutions simultaneously, compare them to each other, and choose the most optimal one.
Why Quantum Annealing Benefits Stock Portfolio Analysis
Quantum annealing can evaluate large datasets for stock portfolio analysis. It can then determine which stocks are likely to perform well in a given situation.
This is because the quantum annealing process involves using large amounts of data to identify an optimal state. Pharmaceutical researchers can utilize quantum annealing to identify the best protein to use in a drug, making it easier to choose proteins for use in medications.
When choosing which stocks to include in portfolios, quantum annealing can demonstrate stronger performance when it comes to:
Daily profit factor (DPF). The QA process can determine which stocks are consistently the most profitable daily.
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