# Alt data – the perfect solution for investors plagued by market volatility?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-08-24
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Maximise Stock Market Returns in 2020 with Alt Data Insights
Meta Description: Maximise stock market returns by utilising alternative data sources for real-time insights on market trends and investor sentiment.
URL: https://financedigest.com/alt-data-the-perfect-solution-for-investors-plagued-by-market-volatilityhtml

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_By_ **_Omri Orgad,_** _Managing Director,_ [_Luminati Network_](https://luminati.io/) _s_

Traders, investment firms and hedge funds looking to maximise their stock market returns have always been tasked with striking the right balance between risk and reward. In 2020, this balance has proved more elusive than ever given the record levels of volatility plaguing global equity markets.

The uncertainty generated by the spread of the coronavirus pandemic have sent stock markets around the world into a ‘bear market’. The UK FTSE 100 Index suffered its biggest single-day loss since 1987, with a [sudden 10.9% fall](https://metro.co.uk/2020/03/12/ftse-100-loses-10-150000000-wiped-off-12389160/#:~:text=The%20FTSE%20100%20Index%20has%20suffered%20its%20biggest%20one%2Dday,more%20than%20%C2%A3150%20billion.), highlighting widespread pessimism and negative investor sentiment.  Although many markets have rebounded, [strategists at Goldman Sachs have predicted that volatility will remain elevated until the end of 2020](https://www.marketwatch.com/story/high-volatility-is-here-to-stay-for-2020-goldman-names-31-stocks-to-deliver-the-best-risk-adjusted-returns-amid-the-turbulence-2020-06-29). Therefore, to make the most profitable decisions on stocks, investors need a wealth of information to analyze and act upon. While traditional sources of data, such as [market forecasts and earnings reports](https://www.financedigest.com/industrial-catalytic-converter-market-size-share-forecast-report-2027-covid-19-impact-analysis-fmi.html "Industrial Catalytic Converter Market Size, Share, Forecast Report – 2027 – COVID-19 Impact Analysis | FMI"), remain important, they take time to pull together. As such, they can be based on outdated information.

This model of acting solely on long-established sources of information isn’t fit for purpose in [today’s modern world](https://www.financedigest.com/bridging-the-gap-between-banking-and-digital-accessibility-in-todays-digital-by-default-world.html "Bridging the Gap Between Banking and Digital Accessibility in Today’s ‘Digital by Default’ World"). With [data driving](https://www.financedigest.com/how-alternative-data-drives-e-commerce-success.html "How Alternative Data Drives E-commerce Success") business and innovation, it’s no surprise that a rethink was needed regarding the data used to make investments. Therefore, a new form of data, called alternative (alt) data, is becoming the most [important asset for decision makers](https://www.financedigest.com/exclusive-indian-car-makers-propose-tax-cut-on-imports-in-trade-deal-with-britain.html "Exclusive-Indian car makers propose tax cut on imports in trade deal with Britain"). Alt data [provides](https://www.financedigest.com/comparative-analysis-of-the-best-data-room-providers.html "Comparative Analysis of the Best Data Room Providers") live data on factors that can impact the markets and can therefore hand investors a crucial advantage. It can include [stock market financial data,](https://luminati.io/use_cases/stock-market-data) satellite imagery to detect customer footfall, measurements of social media sentiment, changes in currency value, and many other external data sources that can build a more accurate picture for investors.

The concept of alt data isn’t a new one. That being said, the huge amount of information published online and the increasingly advanced data collection tools are pushing alt data to the [next level](https://www.financedigest.com/is-ai-taking-quality-and-cost-optimization-of-enterprise-services-to-the-next-level.html "Is AI taking quality and cost optimization of enterprise services to the next level?"). Collecting [data in real time](https://www.financedigest.com/why-now-is-the-time-for-banks-to-use-their-data-to-support-customers.html "Why now is the time for banks to use their data to support customers") and at scale can seem like an overwhelming task, but it’s becoming an unavoidable part of staying competitive. Let’s look at one interesting example of unconventional external data sources being used to drive investor decisions:  A [hedge fund  grew 30% by tracking the purchasing decisions of largely amateur investors on the app Robinhood](https://markets.businessinsider.com/news/stocks/robinhood-stocks-hedge-fund-up-year-popular-picks-gains-strategy-2020-8-1029468650). This app that lets users [trade stocks](https://www.financedigest.com/global-stocks-trade-higher-at-the-end-of-a-volatile-month.html "Global stocks trade higher at the end of a volatile month") free of traditional brokerage fees, and it is enjoying a spike in popularity during the pandemic. Having this data allowed the [hedge fund](https://www.financedigest.com/what-is-a-hedge-fund.html "What Is A Hedge Fund") to make informed decisions on equities based on live data that indicated their mainstream perception amongst amateur investors; the data also enabled the hedge fund to reap the outsized rewards.

For alt data to live up to its true potential, investors need to have [access to the most recent relevant data](https://www.financedigest.com/businesses-seek-better-access-to-data-to-support-environmental-objectives-bright-data-research-reveals.html "Businesses seek better access to data to support environmental objectives, Bright Data Research Reveals"). [Automated data collectors](https://luminati.io/products/data-collection-automation) are an indispensable part of making this a reality. Data collectors allow businesses to receive the [latest insights](https://www.financedigest.com/nutragenomics-market-overview-forthcoming-technologies-future-trends-latest-insights-by-share-outlook-till-2022-2029.html "Nutragenomics Market Overview, Forthcoming Technologies, Future Trends, Latest Insights By Share, Outlook Till 2022-2029") from the sources that matter with the collection of publicly available data. A data collector will be able to gather real-time insights and feed them into the [investment company](https://www.financedigest.com/more-companies-investing-heavily-in-business-services-software.html "More Companies Investing Heavily In Business Services Software"), which can then analyse and act upon these insights.

Investing in [stock markets](https://www.financedigest.com/bitcoin-falls-to-22-month-low-as-stock-markets-tumble.html "Bitcoin falls to 22-month low as stock markets tumble") has always been a process of carefully considered risk for those involved. Given today’s markets, some of the most volatile on record, this element of risk is not going anywhere. Risk has led investors throughout history to constantly [search out the most powerful](https://www.financedigest.com/analysis-nickel-meltdown-puts-spotlight-on-lmes-search-powers.html "Analysis-Nickel meltdown puts spotlight on LME’s search powers") information and act on it. However, in the modern age, the sources of this information have fundamentally changed. The rapid [move towards](https://www.financedigest.com/the-biopesticides-market-to-move-towards-constructive-advancements.html "The Biopesticides Market To Move Towards Constructive Advancements") unconventional data sources has permanently shifted the game for investors. If used correctly, alt [data has the potential to make investors’ decisions more informed than ever](https://www.financedigest.com/when-not-if-why-a-data-breach-response-plan-is-more-important-now-than-ever.html "When not if: why a data breach response plan is more important now than ever") before, and may act as a panacea for current volatility.

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