Afinin Labs Inc. of St. John’s is quickly becoming one of the stars of the tech community in Newfoundland and Labrador, largely because of the commercial potential of its stock-price prediction software, Zenquant. Recently, the company announced that it’s in the final stages of negotiations with a large financial institution to test Zenquant in a six-month trial.

The company was founded in 2009 by Memorial University researchers Garnett Wilson and Wolfgang Banzhaf. Zenquent applies algorithms based on minute-by-minute stock feed from the Nasdaq and the New York Stock Exchange; then alerts day traders when it detects movements of price and volume that signal a rise or fall in specific share prices. The software can alert the trader on all major smartphones and/or PC and Apple operating systems.

To date tests for the software have been based on historic data. But the upcoming trial at a trading floor at a financial institution will be an opportunity to test the system live. The system is not 100% accurate all the time, but it is accurate enough that day traders (people who trade stocks for short-term gains) can improve their performance. “Based on our back tests, we get about 80% accuracy, and we’re usually a little bit better than that,” says Wilson. “We’ve been told that anything over 70% is sellable.” The software works whether the market is rising, falling, or stable, but it has had the greatest success in a gently falling market. 

Last year the company ran a 60-day trading test, tantamount to an entire quarter, and produced impressive results—the results are documented in an academic paper posted on Afinin.com. Using Zenquant, individuals produced returns in some sectors as high as 42.35%. The software also led to an outperformance in seven out of nine market sectors during the period of the analysis, and in those seven sectors the outperformance was increased by 201% to 679%.

Currently Afinin is housed within the Genesis Centre, Memorial University’s incubation facility that assists local start-ups in the early stages of their development. And, in the coming months Wilson and Banzhaf not only hope to find buyers for its day-trading system but also plan to roll out a similar system for shareholders who hold stock for longer periods.

In April the company received $147,000 in support from the Government of Newfoundland and Labrador, which will offset marketing costs and allow the pair to travel to industry trade shows. Up to now, says Wilson, the marketing has been carried out through personal contacts, and he and Banzhaf haven’t been able to present the system at financial industry trade shows and conferences.

Afinin also received financing from a single angel investor (Wilson declined to name the individual or state the size of the investment). The principals are now working on raising about $300,000 in additional financing. “Afinin is a great example of how to turn university research into a technology product,” says David King, president of the Genesis Group. “Two experts in genetic programming have developed a user-friendly product that puts in the hands of the individual the power of algorithmic trading used by major financial institutions.”