The Dow Jones Industrial Average (DJIA) index witnessed a significant fall in the past week amid concerns over a surge in bond yields and trade war between the US and China. In our view, news sentiment based strategy can help investors to predict an impending movement in the market.
Heckyl has developed FiND Sentiment Indicator which reflects the underlying sentiment of news coverage on the companies within the index. The moving average strategy based on FiND Sentiment Indicator signals the potential impact of the news sentiment on the value of the underlying index.
For instance, FiND Sentiment Indicator turned bearish 4-days prior to the 832 points crash in the DJIA index on October 10 (Image 1). Our system analyzed 1,01,066 news items for 30 companies within the DJIA index for the past 6-months. Out the total, 74,780 news items were positive, while 26,286 news items were negative.
[Image 1: Bullish/ Bearish Signals defined by Sentiment Indicator Strategy vs. DJIA]
Our system generated bullish/ bearish signals for the DJIA index based on the crossover of fast-moving (10-days) and slow-moving (30-days) averages of FiND Sentiment Indicator.
Our back-testing proved the application of FiND Sentiment Indicator based strategy for the DJIA index (Image 2). Our strategy (i.e. Buy/sell on bullish/bearish signal and hold the position till the signal reverses) has outperformed the DJIA index by a wide margin in the past 6-months.
[Image 2: Investment performance of Sentiment Indicator strategy vs. DJIA]
To know more about FiND News and Sentiment Analytics, email us at firstname.lastname@example.org