Balance Sheet Complexity

Overview

Make more informed investment decisions to mitigate risk by leveraging balance sheet data. Quantitative Complexity Theory pinpoints when a company moves from 'too big to fail' to 'too complex to survive' and helps investors identify the true drivers of risk in the Balance Sheet. In a world dominated by turbulence and inter-dependency, fragility and complexity can significantly impact company profitability.

Gain deeper insight into complexity risks embedded in your portfolio companies. Complexity is a fundamental physical property of any system, and increasing uncontrolled complexity is a major threat to all businesses and the global economy. Take advantage of Optimum’s Balance Sheet Complexity Indicator to identify such risks in your portfolio.

Leverage a theory with origins in quantum mechanics, systems theory and image analysis. Optimum uses Quantitative Complexity Theory to extract all linear and non-linear relationships between the tradeable components of a system (e.g. an index or investment universe) to construct investment portfolios. It requires no models and accounts for the nonlinearities and dispersion of data using entropy concepts, as opposed to standard deviations.

Data Feed Coverage

Data Feed Details

Evaluate the complexity of portfolio companies based on Quantitative Complexity Theory (QCT). Using at least 12 quarters of company data, Optimum calculates the current complexity and a complexity interval. The upper bound (critical complexity) is the level of complexity above which the company becomes unmanageable, as too much entropy can arise from the Balance Sheet. The lower bound (minimum complexity) is the minimum level of complexity created by the company. Balance sheet items are also ranked according to their contribution to the overall company complexity. Items at the top are the main drivers of complexity and should be addressed by the executive management to reduce the complexity (and increase the manageability) of the company.

Firm Information

Created in 2016, Optimum is the first company to measure complexity based on a proven model-free approach and to launch complexity-based investment strategies. Optimum uses proprietary technology and Quantitative Complexity Theory (QCT), a model-free measure of correlation created by company Co-founder & CTO Dr. Jacek Marcyk, to trade investment portfolios. Optimum also offers risk management advisory services to financial companies.