IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2509.16707.html
   My bibliography  Save this paper

Increase Alpha: Performance and Risk of an AI-Driven Trading Framework

Author

Listed:
  • Sid Ghatak
  • Arman Khaledian
  • Navid Parvini
  • Nariman Khaledian

Abstract

There are inefficiencies in financial markets, with unexploited patterns in price, volume, and cross-sectional relationships. While many approaches use large-scale transformers, we take a domain-focused path: feed-forward and recurrent networks with curated features to capture subtle regularities in noisy financial data. This smaller-footprint design is computationally lean and reliable under low signal-to-noise, crucial for daily production at scale. At Increase Alpha, we built a deep-learning framework that maps over 800 U.S. equities into daily directional signals with minimal computational overhead. The purpose of this paper is twofold. First, we outline the general overview of the predictive model without disclosing its core underlying concepts. Second, we evaluate its real-time performance through transparent, industry standard metrics. Forecast accuracy is benchmarked against both naive baselines and macro indicators. The performance outcomes are summarized via cumulative returns, annualized Sharpe ratio, and maximum drawdown. The best portfolio combination using our signals provides a low-risk, continuous stream of returns with a Sharpe ratio of more than 2.5, maximum drawdown of around 3%, and a near-zero correlation with the S&P 500 market benchmark. We also compare the model's performance through different market regimes, such as the recent volatile movements of the US equity market in the beginning of 2025. Our analysis showcases the robustness of the model and significantly stable performance during these volatile periods. Collectively, these findings show that market inefficiencies can be systematically harvested with modest computational overhead if the right variables are considered. This report will emphasize the potential of traditional deep learning frameworks for generating an AI-driven edge in the financial market.

Suggested Citation

  • Sid Ghatak & Arman Khaledian & Navid Parvini & Nariman Khaledian, 2025. "Increase Alpha: Performance and Risk of an AI-Driven Trading Framework," Papers 2509.16707, arXiv.org, revised Oct 2025.
  • Handle: RePEc:arx:papers:2509.16707
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2509.16707
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milena Vuletić & Felix Prenzel & Mihai Cucuringu, 2024. "Fin-GAN: forecasting and classifying financial time series via generative adversarial networks," Quantitative Finance, Taylor & Francis Journals, vol. 24(2), pages 175-199, January.
    2. Lahmiri, Salim & Bekiros, Stelios, 2020. "Intelligent forecasting with machine learning trading systems in chaotic intraday Bitcoin market," Chaos, Solitons & Fractals, Elsevier, vol. 133(C).
    3. Gil Cohen, 2022. "Algorithmic Trading and Financial Forecasting Using Advanced Artificial Intelligence Methodologies," Mathematics, MDPI, vol. 10(18), pages 1-13, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bartosz Bieganowski & Robert 'Slepaczuk, 2024. "Supervised Autoencoders with Fractionally Differentiated Features and Triple Barrier Labelling Enhance Predictions on Noisy Data," Papers 2411.12753, arXiv.org, revised Nov 2024.
    2. Sudersan Behera & Sarat Chandra Nayak & A. V. S. Pavan Kumar, 2024. "Evaluating the Performance of Metaheuristic Based Artificial Neural Networks for Cryptocurrency Forecasting," Computational Economics, Springer;Society for Computational Economics, vol. 64(2), pages 1219-1258, August.
    3. Bartosz Bieganowski & Robert Ślepaczuk, 2024. "Supervised Autoencoder MLP for Financial Time Series Forecasting," Working Papers 2024-03, Faculty of Economic Sciences, University of Warsaw.
    4. Beatrice Acciaio & Stephan Eckstein & Songyan Hou, 2024. "Time-Causal VAE: Robust Financial Time Series Generator," Papers 2411.02947, arXiv.org.
    5. Minati, Ludovico & Mancinelli, Mattia & Frasca, Mattia & Bettotti, Paolo & Pavesi, Lorenzo, 2021. "An analog electronic emulator of non-linear dynamics in optical microring resonators," Chaos, Solitons & Fractals, Elsevier, vol. 153(P2).
    6. Mammadov Huseyn & Africa Ruiz-Gandara & Luis Gonzalez-Abril & Isidoro Romero, 2024. "Adoption of Artificial Intelligence in Small and Medium-Sized Enterprises in Spain: The Role of Competences and Skills," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 26(67), pages 848-848, August.
    7. Lu Zhang & Lei Hua, 2025. "Major Issues in High-Frequency Financial Data Analysis: A Survey of Solutions," Mathematics, MDPI, vol. 13(3), pages 1-40, January.
    8. Jiawei Wang & Zhen Chen, 2024. "Factor-GAN: Enhancing stock price prediction and factor investment with Generative Adversarial Networks," PLOS ONE, Public Library of Science, vol. 19(6), pages 1-26, June.
    9. Mingzhe Wei & Georgios Sermpinis & Charalampos Stasinakis, 2023. "Forecasting and trading Bitcoin with machine learning techniques and a hybrid volatility/sentiment leverage," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(4), pages 852-871, July.
    10. Nikolas Michael & Mihai Cucuringu & Sam Howison, 2024. "A GCN-LSTM Approach for ES-mini and VX Futures Forecasting," Papers 2408.05659, arXiv.org.
    11. Darya Lapitskaya & M. Hakan Eratalay & Rajesh Sharma, 2025. "Prediction of Cryptocurrency Prices with the Momentum Indicators and Machine Learning," Computational Economics, Springer;Society for Computational Economics, vol. 66(3), pages 2483-2501, September.
    12. Cao, Guangxi & Ling, Meijun, 2022. "Asymmetry and conduction direction of the interdependent structure between cryptocurrency and US dollar, renminbi, and gold markets," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    13. Imjai, Narinthon & Yordudom, Tanakrit & Yaacob, Zulnaidi & Saad, Nor Hasliza Md & Aujirapongpan, Somnuk, 2025. "Impact of AI literacy and adaptability on financial analyst skills among prospective Thai accountants: The role of critical thinking," Technological Forecasting and Social Change, Elsevier, vol. 210(C).
    14. Ren, Yi-Shuai & Ma, Chao-Qun & Kong, Xiao-Lin & Baltas, Konstantinos & Zureigat, Qasim, 2022. "Past, present, and future of the application of machine learning in cryptocurrency research," Research in International Business and Finance, Elsevier, vol. 63(C).
    15. Iwao Maeda & David deGraw & Michiharu Kitano & Hiroyasu Matsushima & Hiroki Sakaji & Kiyoshi Izumi & Atsuo Kato, 2020. "Deep Reinforcement Learning in Agent Based Financial Market Simulation," JRFM, MDPI, vol. 13(4), pages 1-17, April.
    16. Ardita TODRI & Petraq PAPAJORGJI, 2024. "Artificial Intelligence Waves In Financial Services Industry: An Evolution Factorial Analysis," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 63-75, June.
    17. Joni Fat & Parwadi Moengin & Pudji Astuti & Sally Cahyati, 2025. "Sustainability In Forex Trading: A Review In Search Of The Sarsa-Fis Hybrid Method As A Novelty," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 28(Spesial I), pages 71-94, February.
    18. Bhaskar Tripathi & Rakesh Kumar Sharma, 2023. "Modeling Bitcoin Prices using Signal Processing Methods, Bayesian Optimization, and Deep Neural Networks," Computational Economics, Springer;Society for Computational Economics, vol. 62(4), pages 1919-1945, December.
    19. Gil Cohen, 2022. "Algorithmic Trading and Financial Forecasting Using Advanced Artificial Intelligence Methodologies," Mathematics, MDPI, vol. 10(18), pages 1-13, September.
    20. Jang Ho Kim & Seyoung Kim & Yongjae Lee & Woo Chang Kim & Frank J. Fabozzi, 2025. "Enhancing mean–variance portfolio optimization through GANs-based anomaly detection," Annals of Operations Research, Springer, vol. 346(1), pages 217-244, March.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2509.16707. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.