Making Better Decisions By Using Alternative Data

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In recent years, there has been a considerable buzz about finances and investments, as the popularity rises, so does the demand for resources. That’s where alternative data became a hit. This form of data has shown a positive impact on the financial sector, all thanks to alternative viewpoints and untraditional sources.

The financial and investment industry is full of risks and rapid changes. Professionals need to stay ahead of their rivals and, at the same time, be careful with assessments to avoid too much risk. 

Coresignal is a great alternative data provider that helps businesses to get the needed data collected from alternative sources. Many analysts and professionals are now using the services of alternative data providers, as this is a fast solution important for quick decision-making.

What is alternative data?

Alternative data gets such a name because it doesn’t come from traditional sources. It’s untraditionally generated or collected data that provides timely and unique insights which were previously not easily accessible. 

For investors, alternative data generally means looking beyond the picture, it can help formulate new trading ideas and generate new share prices. Such datasets are just gaining popularity and are esteemed to grow from 2022 to 2030 by 54,4%.

Main sources of alternative data

Product reviews

Any untraditional source of data is considered an alternative, plenty of things fall under this category. Successful companies don’t stick to one source of alternative data, they grab what they can get, in fact, over half (54%) of market leasing fund managers use seven or more alternative data sets. The most useful and popular include:

A lot of information can be found on the web, information that’s usually processed for consumers can be useful for companies. That includes the number of likes, comments, and reviews that portray how a customer feels about the good or service. 

Web traffic

Drops and spikes of website visits can be informative. Even though views don’t translate into purchases, they do signify interest. The same goes for app downloads and offloads and screen time hours.

Credit card data

A lot of behavior and trend data can be generated from credit card data. This form of alternative data indicates a shift in spending patterns and induces higher investments in specific companies and industries. 

Satellite imagery

Surprisingly, but yes, a picture of the Earth can serve all types of purposes. If we talk about investors, they use this imagery to check out construction, the prosperity of oil fields, how many cars are in lots, monitor natural disasters, and more. 

Alternative data use cases

When alternative data just started to take off, its main users were hedge funds, in fact, nowadays, 17 in 20 leading hedge fund managers use two or more alternative data sets. This was mainly because alternative data was unreasonably expensive and positioned for wealthy traders. 

Nowadays, alternative data can be found in many investment firms, algorithmic traders, and investors’ arsenals. The data is used to guide their strategies for generating better returns and new opportunities. 

Main benefits of using alternative data for analysis

The real question is, why not just stick to traditional data? Other than the fact that alternative data is “alternative”, there are at least a few other very good factors to it. 

  • Relevance. Alternative data gets produced daily, meaning you’ll always stay on top of the latest news and changes. 
  • Frequency. Data is produced more often, and in greater batches, there is a greater chance of spotting trends. 
  • Context. Traditional data will show trend changes, whereas alternative will also explain why changes are happening.
  • Creativity. This is pretty self-explanatory, new creative ways to find opportunities and success.

Conclusion

Alternative data has become an essential tool in the hands of investors and finance specialists. Investors that want to ensure their decisions are data-driven and strategic should be aware of the benefits of analyzing alternative data.

Traditional sources combined with alternative data will reveal big success, it’s the perfect combination of critical components of analyzing stock and an outside picture of it. What hides behind the picture is what you should pay attention to because if it’s a mess out there, the picture won’t turn out well. 

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