Quantitative analytical procedures are some of the most successful in the financial world, with an increasing number of money managers turning the grunt work of data processing over to computer algorithms and artificial intelligence (AI). One argument in favor of quantitative methods like these is that they remove the human element from the analytical process, thereby ensuring faster processing times, more thorough analysis, and the effective removal of emotions and potential bias from the process. Now, at least one company is looking to capitalize on the advantages that quantitative methods have over old-fashioned human ones, but in a new area: sports betting.

The new company, Stratagem, is based in London and was set up by an ex-hedge funder, Andreas Koukorinis. In an interview with Business Insider, Koukorinis described his initial efforts at harnessing the powers of quantitative analysis for the purposes of sports betting as "building these robots to let them run around on the floor." He and his team have been developing predictive analytics programs for sports betting procedures, using machine learning and AI to process vast data fields. With these computer systems in place, Koukorinis believes that he will gain an edge in the competitive and often-arbitrary world of sports betting.

Koukorinis has been developing Stratagem for several years, and the company now appears to be taking off. The fund has seen some success with its machine learning models, and Stratagem now has an internal syndicate which allows it to bet its own money and bring in a return. One of the next steps for the fund is to raise around 25 million in the next few months to allow for further growth. Investors will essentially be buying into a sports betting-focused hedge fund.

Charles McGarraugh, CEO of the fledgling company, believes that the model is a straightforward sell to potential investors. "Sports lend themselves well to this kind of predictive analytics because it's a large number of repeated events. And it's uncorrelated to the rest of the market. And the duration of the asset class is short."

Stratagem focuses on both data collection and processing. For the former, the company uses both public sources as well as its own data generation system. Once the data has been gathered, Stratagem uses its analytical tools to crunch the numbers in search of mispriced odds. The results so far have been promising.

Could this be the future of quant methods? Koukorinis and others with Stratagem believe so, seeing a strong connection between the world of sports betting and the hard data analysis that quant is specially designed for. Whether the company will beat the odds remains to be seen.

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Sports Betting: The Next Big Thing for Artificial Intelligence - Investopedia