Struggling to keep pace with data-driven competitors? Poor alternative data integration means missed opportunities and lagging returns. This article reveals how to strategically evaluate and integrate alternative data, ensuring your measurement unit is precise for maximum impact.
Table of Contents
This section outlines the essential stages for integrating alternative data into the investment process. From clearly defining your data needs and rigorously testing data sets, to efficient ingestion, and extracting meaningful signals, each stage provides a step-by-step approach to making the most of alternative data. Read on to learn how to gain a competitive edge using a carefully structured approach.
Integrating alternative data requires precise business requirements, achieved through collaboration between portfolio managers, analysts, and data scientists. Key needs include defining the data—from credit card to satellite data—tailored to the investment strategy.
The data’s format (structured, unstructured, or point-in-time) depends on the firm’s tech. Clear functional needs, like format, delivery, and history are crucial. Support requirements, such as channels and time zones, are also vital.
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Before committing to alternative data, test its quality and potential.
Effective data ingestion follows a successful trial. High-frequency data is best imported in real-time using custom APIs, whereas lower-frequency data is processed in batches using formats like XML, CSV, or Parquet. Unstructured data needs pre-processing before combining it with structured data. Data is then stored appropriately: structured data in SQL databases, and link-based data in graph databases. This efficient process makes all data ready for analysis.
Extracting signals and building models is vital for using alternative data effectively. This may mean finding buy/sell signals or volatility forecasts. The process begins with brainstorming sessions to create testable hypotheses. Data scientists then choose appropriate modeling strategies. Backtesting determines if the signals generate sufficient alpha, which is the investment’s performance relative to a benchmark. If the results are positive, the models are implemented for live use, and their performance is tracked. Data must prove it’s worth the cost of acquiring, processing, and storing, to ensure it is an asset rather than a liability.
After integrating alternative data, it’s essential to set up clear reporting and monitoring. This includes dashboards that show key insights in an actionable way for leaders. These dashboards need easy-to-use interfaces for clear communication of trends and patterns. Also, have a flexible system to adapt to changing data and market conditions. Continually monitor both data quality and model performance, making necessary adjustments to keep up with changing market conditions.
Using alternative data introduces risks.
To invest in alternative data, it’s crucial to evaluate its real potential. The following reveals how to assess a dataset’s true value by examining its signal strength, scope, and quality. Unlock the key to making informed decisions about which data sources will fuel your investment success and which ones to leave behind.
Evaluating data requires assessing its signal strength using vendor-provided research. This might include correlation analysis between the data and metrics like a company’s revenue. A vendor might show a 0.7 correlation between their data and revenue growth. This detailed quantitative assessment enables informed decisions about investing in a new dataset.
Important Reminder: This analysis is for reference only and does not constitute any product or investment advice.
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“Taiwan stock market data, TEJ collect it all.”
The characteristics of the Taiwan stock market differ from those of other European and American markets. Especially in the first quarter of 2024, with the Taiwan Stock Exchange reaching a new high of 20,000 points due to the rise in TSMC’s stock price, global institutional investors are paying more attention to the performance of the Taiwan stock market.
Taiwan Economical Journal (TEJ), a financial database established in Taiwan for over 30 years, serves local financial institutions and academic institutions, and has long-term cooperation with internationally renowned data providers, providing high-quality financial data for five financial markets in Asia.
With TEJ’s assistance, you can access relevant information about major stock markets in Asia, such as securities market, financials data, enterprise operations, board of directors, sustainability data, etc., providing investors with timely and high-quality content. Additionally, TEJ offers advisory services to help solve problems in theoretical practice and financial management!
When evaluating datasets, consider both scope and quality. While ideally, data covers all sectors, many datasets are sector-specific, such as patent data for healthcare. Industry-specific data can be valuable if it provides a high alpha of about 1-2% for specific securities.
Also, for aggregated data, confirm accuracy and completeness. For example, vendors must provide metrics on the accuracy of ticker tagging to at least 99%. Firms must balance data quality with their capacity to validate it, helping make well-informed purchase decisions.
Seeking wonderful alternative datasets? TEJ’s commitment to providing excellent alternative data extends beyond our own platform. We have established a strong collaboration with Eagle Alpha, Neudata, and Snowflake, leading datasets and analytics platforms. By providing alternative datasets, quantitative data, market data, and ESG data, we ensure that our high-quality data is accessible to a wider audience of investors and researchers.
TEJ stands out as a trusted alternative data provider that prioritizes data accuracy and relevance for effective quantitative strategies. With daily updates, TEJ provides a comprehensive view of the current market situation. Our Watchdog Database provides up-to-date news and event scores to help you obtain the latest information on listed companies in Taiwan’s stock market. Moreover, our ESG Event Radar Score (ERS) offers daily assessments of associated companies, helping you identify potential operational ESG risks or opportunities in your chosen field.
TEJ’s dedication to providing top-tier alternative data is amplified through collaborations with key industry players, such as Eagle Alpha, Neudata, and Snowflake. These partnerships with leading datasets and analytics platforms ensure our robust alternative, quantitative, market, and ESG data reaches a wider range of investors and researchers.
