How stock price and sentiment move hand in hand
A value investor invests in a stock after looking at financials of the company, analysing annual reports and news on stock/sector, reading management outlook and tracking price movement. However, one of the key challenges for investors and even for traders is to track the sentiment around the stock on a daily basis without missing any relevant news.
In today’s world, things change very rapidly and what looked to be a multibagger two months ago can turn into a disastrous investment if the relevant news and sentiment around the stock is not tracked regularly. Trading is all about the timely entry and exit in a stock. A gap between perception and actual reality can offer traders and investors a profitable trading opportunity using sentiment analysis across various asset classes.
Heckyl’s sentiment tool allows a user to measure the sentiment of a particular news item or news flow around an instrument and evaluate its potential impact, in real-time. In today’s blog let us take a look at Heckyl’s Stock Sentiment graph and how effectively one can use it as a precursor to stock price movement. Apple, world’s most valuable listed company has huge traction globally as one of the most renowned brands amongst consumers, mainstream and social media. Let us take a case study of Apple’s price movement compared to its sentiment graph.
How to view Stock Sentiment Graph
Purple dotted line denotes the stock price movement while yellow dotted line indicates sentiment score movement on a scale of -100 (extreme negative) to 100(extreme positive) with zero as neutral. The orange circles represent the events that took place on a particular day on which the sentiment score was calculated. Green means the sentiment is positive while red suggests negative sentiment. Blue bars indicate volume or total shares traded on that day. When a user selects a specific day, all news on that day will appear in the right side along with the category, source and number of news on a specific topic in that cluster. A user can view all the news from original sources by clicking on it. Read our blog for more details on News Analytics Platform
As we can see from the chart in first instance (correlation 1) between February 23 and 27 sentiment score moved lower from 13 to -50 and stock price drifted lower from USD 132 to 128. On February 25, news broke that Apple will have to pay USD 530 million for patent infringement. News of Apple may face more lawsuit for patent infringement hit mainstream media on February 27 dragging the stock lower to USD 128.
In instance 2, between March 9 and 11 sentiment score moved down from 88 to -19 and stock price slumped from USD 127 to 122. On March 11, news broke on mainstream media of Apple Store and iTunes facing outage for more than 8 hours. However, it was a temporary phenomenon and stock rebounded back to USD 127 on March 17 after positive news on Apple Watch, Apple TV and new investments.
As seen from the above correlations, sentiment score moves ahead of the price movement guiding an investor or trader to predict the future stock price movements before market opening. Heckyl’s Sentiment graph allows a layman to understand how a stock will get impacted by forming a cluster of news of similar topics and analyzing the overall positive or negative sentiment for each news cluster while institutional players can keep an eye on all relevant news and no major news gets missed out.
Live streaming of news as real-time pulse and sending appropriate alerts to users is one of the salient features of Heckyl’s News platform. A user can also view latest news and historical news up to 2 weeks. Apart from stocks, one would get live news, alerts and notifications on commodities, currencies, geo-political news from 35 countries. Stay tuned to this page for more blogs on new and exciting features of our products.
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2 thoughts on “How stock price and sentiment move hand in hand”
June 5, 2015 at 8:15 am
[…] their client base of over 15,000 wealth managers, advisors and traders. As we covered in our post ‘How stock price and sentiment move hand in hand’ Heckyl tracks and scores news sentiment over time, thereby allowing users to get real-time alerts […]
August 28, 2015 at 3:49 pm
[…] you can also find insight on news around stocks within your portfolio by simply observing the sentiment graph, that should move hand in hand along with the […]