HFT using neutrino physics: Stats Jackassery

I’ve always wondered what good electroweak theory could ever do for anybody, technologically speaking. The unification theory between electrical  and magnetic forces produced huge technological benefits for humanity; pretty much all electrical, electronic and radio technology is the result -and the technological results happened quickly. Physicists work feverishly on unification theories, more or less because electromagnetic theory was so damned important to humanity. Electromagnetism was unified with the “weak field” way back in 1973 or so (or 1968, depending on if you count the theory before the experiment, which I don’t), and Salaam, Glashow and Weinberg were awarded the Nobel Prize for it in 1979. Call it a round 40 years ago. 40 years after Maxwell’s equations (the unification theory between electricity and magnetism) were written down, humans were using electromechanical power on a wide scale, and radio was already being used (in financial applications no less). Not so much has happened technologically since folks invented electroweak theory.

Espen Haug has apparently spoken of  a potential use for electroweak theory. It got carried by Forbes. His idea, which I assume was somewhat in jest, was using electroweak theory to do high frequency trading. Because neutrinos don’t interact strongly with the rest of nature (that’s why they call it the “weak force”), you can transmit a beam of them through the earth. Basically, Haug noticed that “through the earth” is a much more straight line than “across the earth” which is how signals are generally transmitted. The perimeter of a circle is longer than its diameter. Something which has been known since people started drawing circles in patches of dirt. Therefore, you can potentially trade ahead of price movements in far-away exchanges.

The problem with this, of course, is the fact that any beam of particles which can be transmitted through a giant piece of iron and silicon like the earth can’t be easily detected by anyone. There is a reason they call it the “weak force.” It’s really weak! Detecting any neutrinos at all is a pretty neat trick.  If we wait around a long time, and have really big detectors and a lot of neutrinos coming from somewhere, we can see a neutrino interact with a proton once in a while. People do this sort of thing for a living. It’s fairly important stuff for cosmology, astrophysics and high energy physics. Measurements are difficult, so any experiment involving neutrinos pushes knowledge forward.

I had thought about doing a Shannon type calculation, making some guesses as to neutrino flux humans are capable of producing and transmitting through the earth, and looking at cross sections of the best detectors, to see what kind of information can be transmitted in this way. Another way to think about it, how long do you have to sit around at your detector and count things to see an unambiguous signal in your Poisson noise? If it’s longer than a few milliseconds, you can’t do this trick and make HFT front-runny money.  I don’t know much about neutrino detectors, but I do know that the best ones are size of large scale mining installations, and the time frames for looking for interesting signals are measured in years. It turns out someone already did the hard work for me experimentally by building a neutrino telegraph.

The MINERVA detector has been used for this purpose already, in concert with a beam of neutrinos from Fermilab, which is probably close to the best we can do for making lots of neutrinos. The bit rate is reported as 0.1 bits/second, with a 1% error rate. It was also only through 240 meters of rock (it was about 1km total), as opposed to the diameter of the earth, which is 12750 kilometers. No high frequency trading is going to happen at 0.1 bits/second, or whatever lower rate one can get transmitting the beam through some large chord of the earth’s diameter, assuming you can do that at all.

There are other problems with the idea. How do you modulate a neutrino beam? Can you do it on a millisecond timescale? Maybe you can, but accelerators are big giant things, and doing things like ramping magnetic fields in them up and down to change the energy or amplitude of neutrinos, or accelerate a bit string of neutrino-making protons clumps takes a long time. Making an atom smasher which makes a lot of neutrinos … well, I’m guessing it will be even bigger than Fermilab, which is pretty damn big. I also don’t have a good idea of how collimated a beam of neutrinos are. My guess would be, “not very.” But even if you could make a neutrino ray with a laser-like milliradian divergence (almost certainly impossible), the beam radius on the other end of the earth will be measured in kilometers. This would imply that a detector at the other end would have to be very big indeed. Or else someone else could build a detector within the beam radius and see the same thing.

On the other end of things, the detector in the MINERVA experiment would indeed “fit in a basement” at someone’s trading office; it was only 5 tons of scintillators. Putting aside the beam divergence issue, this would work a lot better if it was a lot bigger. The more mass you have, the more neutrinos you can see. That’s why folks do things like using a cubic kilometer of antarctic ice pack as a detector. Assuming you could scale up the bit rate by increasing the detector size, maybe if you built one 100,000 times bigger, that would be good enough? I’m guessing that 500,000 tons of detector might cost a bit of money. I suppose it is possible, if unlikely. Submarine cables from San Francisco to New Zealand are around 80,000 tons, rather expensive, and not as complex.

Something tells me the HFT boys  aren’t going to be running triangle arb on neutrino signals, like, ever. Nice funding attempt though.

I don’t think Espen Haug deserves the stats jackass award, as he’s a serious guy who knows about noise distributions. He also hasn’t written any papers on the subject. Similar comments apply to the aptly named neutrino physicist, John Learned who presumably knows about detector noise, and isn’t actively agitating for neutrino ansibles.  Bruce Dorminey wrote it; he should definitely know better. Either way, Forbes published this, and it doesn’t even pass a sniff test: someone there was jackassed enough to publish this without disclaimers. For that, Bruce and his credulous numskull editors at Forbes Magazine are, stats jackass of the month:

Does anyone at The Atlantic understand statistics?

At least they’re not pimping talking points for the oligarchy this time: it’s just general journalistic imbecility. No, Anne Hathaway news does not drive Berkshire Hathaway price changes. No, I haven’t tried to do this regression, nor will I ever try to do this regression, because I’m not as statistically retarded as people who think the Huffington Post is anything but an exotic white noise signal generated by the amygdalas of neurotic liberal arts majors.

If anyone reading my blog has fallen victim to the latest installment of the Atlantic’s regularly scheduled moronathon, please see David Leinweber’s excellent and hysterically funny paper, Stupid Data Miner Tricks: Overfitting the S&P500. In it, he uses almost twice as many data points as the HuffPo mouth breather to show a nearly perfect correlation between Bangladeshi butter production and the S&P500. Adding in sheep population also made the regression better. Professor Leinweber’s paper is a classic in the field: anyone who cares about doing statistics properly should read and internalize its lessons.

As for the hedge fund consultant guy they interviewed, John Bates: I hope you are suitably embarrassed or they egregiously misquoted you. Otherwise, I hope I never have to fix one of your messes. You should hang your head in epic shame for your apparent donkey-like lack of understanding of even the most rudimentary ideas about spurious correlation. Until you make amends and grovel in shame before your professional peers for misleading the public about a six data point spurious correlation in exchange for a little publicity, I hereby award you with the very first “Locklin on science statistical jackass of the month” prize:

Enjoy your prize. If I were in charge of the guild, it would be the stockade and rotten cabbages for you. Progress software? Not the guys that make Apama? Some pimp tried to recruit me to that outfit. I couldn’t understand why a CEP would be written in Java, just as I now can’t even imagine working for a company whose CTO doesn’t understand regression.