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Quantitative Analysis Explained

Fast and effective decision-making is the key to survival in business. In order to make decisions, however, leaders need to be able to access the right data. As companies get bigger and bigger, minding that data for actionable insights grows increasingly challenging. 

As such, the practice of quantitative analysis is increasingly necessary to influence decision-making and mitigate risk. Here we’ll explain everything you need to know about quantitative analysis and how it pertains to your business. 

What is quantitative analysis?

Quantitative analysis is a combination of mathematical modelling and computer programming. It is used to analyse past and current events and use this data to predict future trends and mitigate risks. It is also used to influence a wide range of strategies in many aspects of business from finance, to planning, to marketing. And insurers use it to create and influence risk-management strategies.  

What is a quant?

Quantitative analysts or “quants” are most commonly found in the City of London, Wall Street and other trading hubs around the world. In fact, quants are affectionately known as the “rocket scientists of Wall Street”. They use complex mathematical models to evaluate investments, as well as developing trading and pricing tools based on historical stock market data.

Although the trading world is widely regarded as the quant’s natural habitat, you can find them in a wide variety of fields from social sciences to analytical chemistry and even the sporting world.     

Quantitative analysis vs qualitative analysis

As we’ve established, all kinds of businesses rely on the insights and services of quants. However, their services differ greatly from those provided by qualitative analysts. The latter will usually spend some time with the team, get to know the workings of the business and ascertain factors that are difficult to quantify such as workplace morale or brand reputation. 

Because quantitative analysis relies purely on hard data, a quant is unlikely ever to visit your business, meet your team, or even need to research the products you sell. 

Therefore, many businesses will use a combination of qualitative and quantitative analysis to inform their strategies. 

Applications of quantitative analysis

Quantitative analysis may seem like something that only takes place in the context of bustling trading floors. But the truth is that it can have a wide range of practical applications for businesses just like yours. These include:

Accounting

Accounting departments use a range of different quantitative data to estimate the value of prospective capital investments. When you’re balancing an investment’s ROI against its upfront cost, this is a form of quantitative analysis. 

Purchasing and production planning

Businesses often grapple with ascertaining the demand for an upcoming product. They want to ensure that demand is catered to, but they don’t want to plough all their liquid capital into purchasing products or materials if a product is going to gather dust on the shelves. Quantitative tools can ensure that production and purchasing costs are carefully managed. 

Project management

Effective project management relies heavily on quantitative analysis. It enables project managers to effectively allocate resources, and project more accurate deadlines to manage the expectations of stakeholders.

Marketing

Finally, quantitative analysis can also benefit marketing teams. We tend to think of market research as strictly qualitative. However, quantitative methods can help marketing teams to develop campaign budgets, allocate spending and improve the ROI of their campaigns. 

We can help

If you’re interested in finding out more about quantitative analysis, the role of quants, or any other aspect of your business and its finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.

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