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Punting and Probability Theory

Probabilities always play a large role when putting here is a small guide on how to deal with them.

Probability theory is you best friend

When you’re dealing with odds having some knowledge about probability theory is going to give you a huge advantage in terms of analytics. You have probably heard about the expression hedging your bets, which means that you place two bets, for example on both the favorite horse to win and the second favorite horse to win, this way if either one of these horses wins you win, and although your winnings might be smaller in one of these two cases (depending on the specific odds and amounts you bet) you will end up with more money than you came in with. Probability theory allows us to use and discover techniques like these.

Another one which doesn’t have a good name yet is to look for cross correlations. Cross correlations are basically a measure for how independent two events are, when you have a horse that is very close to another horse (by this I mean that they might be friends, or have very similar physical builds) than when one of them does very well, the other horse is also more likely to do very well. In the case of them being “friends” they might motivate each other when things go well, and in the case of very similar physical builds a cross correlation is created because they thrive under the same conditions, if both horses do very well on a wet track than when one of them does well because of rain the other will too. If you try to hedge your bet with horses that have a high cross correlation, than this will be a more risky bet than you will think it is based on the odds (and your normal probability calculations). This is because the horses will either both do very well or both do very bad when they have very high cross correlations, this means that your hedge isn’t that much of a hedge because your basically betting for the same horse twice.

I hope this short introduction will help you hedge your bets in a smart way, and make you win a bit more in the long run.

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