Context Analytics is the leader in Unstructured Financial Data and the Quantitative News Feed is one of the fastest-growing products. This feed monitors thousands of securities daily, gathering data from hundreds of diverse news sources to assess the sentiment surrounding these companies. By pulling in thousands of articles each day, it provides a comprehensive view of how companies are being discussed in the media.
The extensive range of sources ensures that we capture a wide array of perspectives, from major news outlets to niche industry publications, giving a well-rounded and accurate measure of sentiment across the market. This breadth of coverage allows us to identify trends, and sentiment shifts that might otherwise go unnoticed, offering deeper insights into how news impacts market movements.
One valuable metric derived from this feed is the Negativity Ratio for a company, calculated across all articles in which the company is mentioned within the previous 24 hours. This ratio is determined by dividing the total number of negative sentiment hits by the total number of sentiment hits. A high Negativity Ratio indicates that a company is receiving significantly more negative attention.
Given that a lot of price movement occurs overnight, this blog explores whether our Negativity Ratio can signal whether a company's stock will rise or fall overnight. To test this, we calculate the Negativity Ratio before market close and then group the securities into quintiles based on this ratio. The highest quintile represents the most negative news, while the lowest quintile represents the least negative (or most positive) news. We hold these positions from close to open and recalibrate daily.
Our findings show that overnight, these quintiles produce a monotonic spread, with the lowest quintiles (those with the most positive news) significantly outperforming the highest quintiles. This suggests that highly positive news can be a useful indicator for identifying overnight risers, while highly negative news can help spot potential declines.
For more information on our news feed, visit www.contextanalytics-ai.com or click the button below!