Correlated Beliefs and Weak Markets
How expanding your view of the market from one sportsbook to all sportsbooks unlocks betting opportunities.
In the last article, I talked about the powerful concept of correlated beliefs, and how when you place a bet on any one part of a game, you have correlated beliefs on the rest of the game, even if you don’t necessarily realize what exactly those correlated beliefs are. We’ll explore how bettors can incorporate that concept into their betting strategies to maximize their returns on their investment.
What exactly is the advantage of betting correlated beliefs into correlated markets? After all, if we see a bet we think is a profitable one, why bother with even understanding what the correlated outcomes are if we can just bet the market we were targeting in the first place? If we’re only looking at a single sportsbook, this is largely a correct view. Since all markets within a single sportsbook are also correlated, there is not much advantage to finding your correlated beliefs and markets within a single book. However, the sports betting market as a whole is comprised of multiple books, each with their own individual prices on each market. And once you begin to think of a market as the totality of all prices offered on an outcome across all possible books, you can begin to understand on how acting on correlated beliefs can become an actionable strategy by exploiting price differences across multiple books.
For a given bet, most people understand the idea of hold, also known as the vig, the juice, etc.- a measure of how much a sportsbook will charge in the rough equivalent of house edge on an otherwise fair outcome. The classic hold we are used to is a -110 line on a 50/50 outcome, like a spread bet, meaning you will have to pay 11 dollars to win 10 on a 50/50 outcome. When you broaden your view on a given market across all sportsbooks and look at the best prices available for both sides of that market, you can derive a concept called synthetic hold, which is what the hold would be if you took the best price available on both sides of the bet across all sportsbooks. As an example: if Book A offers a spread bet of -3 with prices of -115/-105 on both sides and Book B offers the same line but with prices of -108/-112 on both sides, the synthetic hold for the market would be -108/-105.
If you broaden your view to all markets across all sportsbooks, you will find markets that will have synthetic hold that is close to zero at certain times. Different sportsbooks will adjust their prices with different frequencies, and occasionally the price discrepancies will be large enough across two or more sportsbooks that the synthetic hold for that market will be close to zero. These are market opportunities you should actively be looking for, and are the exact markets you should be looking to target with the correlated outcomes you derive from your initial beliefs.
This concept of betting correlated beliefs into markets with low synthetic hold is far from original: it is explained in much greater detail in The Logic of Sports Betting, an absolute must-read for anyone looking to become a winning sports bettor. I owe a great debt of gratitude to the concepts outlined in this book, so much that I decided to build tools to help players execute the concepts outlined in the book with maximum efficiency and precision, which have been missing in the tools market since the book was released. The book resonated with me on a number of levels, one of which is another important concept: operating under the assumption that your beliefs might be wrong instead of assuming they’re right. It may sound counter-intuitive, but starting your sports betting approach from the assumption that you might be wrong and should seek to lose less, versus assuming you’re right and seeking to win more, is a much more sustainable long-term strategy for becoming profitable in sports betting. We’ll talk about why in the next article.