Word choices and general content impart a specific feeling about a piece of content. A story about a plummeting stock market will impart a different idea and feeling than a story about a company posting record earnings. Sentiment analysis is a tool that takes into account the language used in the corresponding content and determines how positive or negative it appears.
With this tool, CityFALCON users can understand the overall mood surrounding a topic, company, or other target of the sentiment analysis without having to read all of the associated content. In some cases, such as sentiment analysis for an entire watchlist, it would be impossible for a human to read, digest, and understand the sentiment of potentially thousands of associated pieces of content.
Psychological finance and herd mentality is certainly a force in the markets, and Sentiment Analysis can help you gauge those forces. This is especially true for content from highly interactive platforms like Twitter.
CityFALCON calculates the sentiment score of every piece of content itself. At the same time, we aggregate sentiment across many pieces of content for each topic in our database. This aggregate score is properly adjusted (weighted) for the relative importance of inputs to the aggregate, so we can build aggregate scores for a single company all the way up to an entire sector of thousands of companies.
Potential Targets for Sentiment Analysis
Any of the singular topics in our database can be given a sentiment score:
- securities (bonds, stocks, ETFs, etc)
But the score can also be calculated for overarching structures throughout the site:
- entire watchlists
Any entity or topic we have in our database can theoretically have a sentiment score, and sets of these topics combined together on watchlists are also eligible.
Example Use Cases
A sentiment score can be incorporated into many strategies depending on your market role and outlook.
Contrarians can look for high sentiment and sell short, or look for low sentiment and go long. Often the market gets caught up in herd mentality while ignoring the underlying reality, and sentiment analysis can reveal a strong herd mentality that drags an asset away from its intrinsic value.
Short term traders can look for rising or falling trends and take the appropriate actions. Our Sentiment Over Time charts can be quite useful here, since a long-term positive sentiment can indicate a truly transformative, long-term idea or recent hysteria. Sentiment can be combined with other indicators to determine which situation is at hand and take advantage.
Marketing and product teams can watch how new products or announcements affect sentiment floating around the internet through news reports and Twitter then adjust as needed.
Strategists and consultants may want to track competitor positions and the sentiment surrounding individual companies, products, or the entire industry.