Algo Trading and the Corona Crash

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I.In the Corona crash, Wall Street legends have also lost feathers. This applies, for example, to James Simons, the founder of the American investment company Renaissance Technologies. The Renaissance equity funds suffered losses of the order of 10 percent this year. At least the hedge fund flagship Medallion appears to be on the right track, as the Wall Street Journal recently reported.

The investment vehicle, which has only been open to Renaissance employees since 2005, has generated an average return of 39 percent annually over the span of 30 years between 1988 and 2018 after deducting the fees. Medallion trades stocks and futures in a fraction of a second. It is based on algorithms that recognize when a security is over- or undervalued. Large price fluctuations come in handy for such a strategy, which is also known as algo trading.

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