Author: Tommaso Motta
Gaining access to information has become the ultimate goal of investors that want to invest, predict the movements of the stock market, or simply being informed on the situation of the financial world. Therefore, smart investors try to gain access to every single bit of added information they can, to have a competitive edge over the market. This translates into a race to obtain the most amount of alternative data – information about a particular company that is published by sources outside of the company, which can provide unique and timely insights into investment opportunities – that can be obtained by:
- Web scraping, or web harvesting, it is a practice done mostly by programmers that write a code capable of extracting hidden information from web pages, and then translate them into easily interpretable data;
- Acquisition of raw data, refers to the acquisition of unprocessed data (i.e. from a sensor), which is not subject to any form of cleaning, nor translation;
- Third-party licensing, also known as alternative data providers.
What is an alternative data provider?
In general, a data provider is a company, a research institution, or industries, whose main business is gathering information to be sold to third-party companies or privates. In the case of alternative data provider, the type of data they collect, are alternative, meaning that they do not come from traditional sources, (i.e. balance sheets, companies’ reports, etc…), usually big in dimension (they are also known as Big Data), and extremely complex, this is why companies that deal with alternative data, often use many software for both storing or handling them.
Data providers that are currently in the watchlist
Dataminr is a global artificial intelligence company that provides real-time information alerts to hundreds of clients in over 70 countries, it operates for:
- Businesses, to identify and respond to emerging risks across one enterprise.
- The public sector, to enable the fastest real time response
- The newsrooms, to gain the earliest edge in discovering stories that matter to a newsroom audience
Regardless of the sector they operate in, the key attribute of Dataminr is the capability of obtaining critical information before an event occurs, and signaling it to the user via actionable alerts, pop-ups, and app notifications. An example of Dataminr’s successes are the Covid-19 outbreak – successfully predicted ten days before it was publicly announced – or the cryptocurrency bubble. Once the critical information are collected, the platform enables the user to respond with confidence and speed thanks to the alert updates that serve as catalysts for the user, whom can better respond to crises because of the knowledge he has. Moreover, Dataminr extracts data from all over the world, from big business to private, and data are translated in more than 100 languages.
Alexa is an offset of the Amazon company, which focuses on providing Search Engine Optimization (SEO) and web traffic research to agencies and business owners. While Alexa’s stated purpose is not explicitly for alternative data and trading, users can gain some impressive insights into company health and user frequency that can influence their trading.
For example, Alexa’s site rankings list allows users to search for almost any website on the internet and see where the website’s traffic is coming from, where the site is based out of and how the site’s current level of traffic compares over time. If you have a premium plan, you can also view the keywords that brought users to a specific web page when searched on an engine like Bing or Google.
This type of native data is not just useful for business owners who want to find out if their SEO strategy is working — it can also act as a powerful tool for investors who want to use web data to learn about how consumer attitudes shift with regards to specific brands.
FinScience is a data-driven fintech company founded in 2017 by Google’s former senior managers and Alternative Data experts that has been growing a lot, so much so it was the only Italian start-up to be put in the siliconrepublic’s watchlist in 2019. Their main goal is to gather digital contents from social media and e-commerce platforms, blogs and maps in English and Italian and then, through the use of proprietary Machine Learning algorithms, to analyze, filter, interpret and weigh the data generated. The result of this process is what FinScience supplies its customers, more specifically, the data generated can be the basic foundation for two types of solutions:
- Information solutions consisting of indexes and monitoring systems, “alternative” signals and scorings which may refer to individual enterprises, top management, products and/or even to specific topics. In this field we find.
- Alternative Data Intelligence, a software monitoring alternative digital signals about stocks, companies, themes, organized in portfolios, and accessible through simplified dashboards displaying digital and financial indicators
- Alternative ESG, services to boost value of companies’ intangible assets related to sustainability. It is measured the distance between the corporate social responsibility and the external sentiment
- Alternative Scores, combination, and analysis through Artificial Intelligence of traditional data and Alternative digital Data to improve reliability of risk estimation models.
- Operational solutions comprising investment models, strategies and portfolios that result from the Quantamental combination of both Alternative Data and traditional data. In this field we find
- Quantamental Investing, advisory services concerning risk management, predictive models, and portfolio strategies.
- Knowledge Discovery Machines, it is a solution to turn documents into actionable classified data.