In the summer of 2022, at Context Analytics we explored the interaction between overnight momentum and the corresponding overnight sentiment change. Our initial findings revealed a reversion to the mean pattern in stocks priced over $5. Specifically, we observed that when stocks dipped overnight, they tended to rebound from open to close the following day. Conversely, when stocks rose overnight, they tended to drop back down during the same period.
We then examined the change in Twitter's S-Score from the previous close to the market open, aligning this with the overnight stock movements. Our research uncovered that when the sentiment change contradicted the overnight movement—such as a stock dropping overnight but our sentiment change being extremely positive—it enhanced the indicator of a positive reversion to the mean the following open to close. The reverse held true for positive momentum and extreme negative sentiment change.
The purpose of this blog is to update this trading strategy with 2025 year-to-date results to verify if the observed trend has persisted.
Year-to-Date Performance
Interpretation
Examining the 2025 year-to-date performance, we again observe consistent behavior with our previous findings:
- Positive Impact on Negative Momentum: When overnight declines were paired with an extreme positive sentiment change, returns improved substantially, with the long-side portfolio generating nearly +4% outperformance.
- Negative Impact on Positive Momentum: Conversely, when overnight rallies coincided with an extreme negative sentiment change, performance deteriorated, with the short-side portfolio declining by nearly -5%.
- Robust Signal Across Market Conditions: Despite heightened volatility in early 2025, the combination of momentum with sentiment continued to provide a statistically meaningful enhancement over a pure momentum strategy.
Conclusion
The 2025 results to date reinforce the robustness of this strategy: sentiment change from Context Analytics meaningfully augments overnight momentum signals. The divergence between sentiment and price movement remains a powerful indicator of reversion strength, delivering both predictive insight and practical trading value.
This research underscores how unstructured financial data, particularly real-time sentiment from Twitter, can be systematically leveraged to enhance traditional strategies. As markets evolve, integrating contextual signals like sentiment into trading workflows will continue to create edge.
For more detailed information on our methodology and findings, visit www.contextanalytics-ai.com or click the button below.
TL;DR
Context Analytics revisited its 2022 study on combining overnight momentum with Twitter sentiment changes using 2025 year-to-date data. Results confirm that:
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Overnight drops + positive sentiment → strong rebound (+4% outperformance).
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Overnight rallies + negative sentiment → performance worsens (–5%).
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The signal holds up even in volatile markets, proving more effective than pure momentum alone.
Bottom line: Divergence between sentiment and price remains a powerful predictor of intraday reversion, reinforcing the value of integrating real-time sentiment data into trading strategies.