We sought to develop a profitable long-short equity strategy that uses sentiment analysis data as the ranking factor. To do so, many factors were analyzed using Quantopian’s Alphalens tool which generates a tear-sheet of relevant statistics. An ideal factor has perfect predictive power of relative price movements. The averaged sentiment signal with a window length of 3 days was considered the most viable out 8 other candidates tested. Backtesting the strategy from early 2014 to late 2017 yielded a cumulative return of 42.5% and a Sharpe ratio of 1.33.
- Python
- Jupyter Notebooks
- Quantopian