RavenPack news-based index to help FX hedge funds track global macro sentiment
RavenPack, the technology company, has created a news-based macro-economic and geopolitical index that it says can outperform traditional forward-looking surveys to predict the path of the global economy.
The product is aimed at FX quantitative hedge funds, which can incorporate it in their trading strategies. The RavenPack global macro sentiment index extracts news on scheduled and unscheduled global economic and geopolitical events from data produced by the company’s news analytics service.
The RavenPack news analytics service automatically tracks and analyzes unstructured news on all main currencies and commodities, as well as from more than 138,000 key geographical locations, from 30,000 companies and from 2,200 government agencies.
“Our indicator proves that sentiment derived from global real-time news can outperform some traditional measures in assessing the state of the world economy,” says RavenPack’s president and CEO Armando Gonzalez.
RavenPack back-tested the index to January 2000 and found that the product achieved a model correlation of 80% with future US inflation-adjusted GDP growth, outperforming other macro-economic indices tracking the country’s growth, including the monthly University of Michigan consumer sentiment index.
And, as the volume of digital news increased from 2000 onward, the accuracy of the RavenPack index increased, the company says.
“The close correlation with US GDP is already making this data a popular proposition with our institutional clients,” says Gonzalez.
RavenPack clients can access the global macro sentiment index on a daily or monthly basis by subscribing to the company’s news analytics service.
RavenPack launched version 3.0 of that service in September. Although aimed at quantitative hedge funds, the firm believes it will also attract interest from bank proprietary trading desks, FX market makers and eventually the retail sector.
The service is built on technology originally intended for use in the counter-terrorism and security sector, and it works by sifting through thousands of unstructured news stories and turns that information into tradable data within milliseconds.
RavenPack’s previous analytics products were aimed at the equity sector, and the company says the world’s top-five equity quantitative hedge funds are clients.