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sentiment.
In recent years there has been a steady growth of sentiment analysis vendors, including
Sentdex, PsychSignal and Accern. All use proprietary techniques to identify "entities" within
alternative data and then associate a timestamped sentiment score with any extracted information.
This information can then be aggregated over a time period (such as a day), in order to
produce date-entity-sentiment tuples. Such tuples form the basis of a trading signal.
The actual task of taking large quantities of "big data" and quantifying the sentiment is
beyond the scope of the book. An end-to-end production-ready sentiment analysis tool is a large
software engineering undertaking. Hence for retail traders it is often practical to obtain vendor
signals and use those as part of a broader portfolio of quantitative signals to form a strategy.
This chapter will describe a trading strategy based on a particular vendor’s sentiment data,
namely Sentdex, and how a basic long-only strategy can be generated around it.
30.1.1 Sentdex API and Sample File
Sentdex provides an API that allows download of their sentiment data for a wide variety of
financial instruments. The data is available at one minute or one day granularity. More details
of their (paid) offering can be found at their API page.
The API will not be discussed in this chapter since it is a paid product and is mostly useful
as a paper trading or live trading streaming event generator. Since this book concerns backtesting
strategies across historical data it is more appropriate to use a static, locally-stored file to
represent the sentiment data.
Fortuitously, Sentdex provides a sample data file (which can be found at http://sentdex.
com/api/finance/sentiment-signals/sample/) that contains almost five years worth of sentiment
signals, at daily resolution, for many of the constituents of the S&P500.
A snippet of the file is presented below:
date,symbol,sentiment_signal
2012-10-15,AAPL,6
2012-10-16,AAPL,2
2012-10-17,AAPL,6
2012-10-18,AAPL,6
2012-10-19,AAPL,6
2012-10-20,AAPL,6
2012-10-21,AAPL,1
2012-10-22,MSFT,6
2012-10-22,GOOG,6
2012-10-22,AAPL,-1
2012-10-23,AAPL,-3
2012-10-23,GOOG,-3
2012-10-23,MSFT,6
2012-10-24,GOOG,-1
2012-10-24,MSFT,-3
2012-10-24,AAPL,-1
It can be seen that each row contains a date, a ticker symbol and then an integer representing
strength of sentiment, between +6 ("strong positive sentiment") and -3 ("strong negative