Using Alternative Data to Find Clues During the Pandemic

Chain of Demand

There is no doubt that the pandemic has caused a lot of strain on businesses and people at large. The truth is, the world was ill-prepared to face the consequences of such a global issue. As such, today, hedge funds are re-evaluating their performance against the pandemic to anticipate the opportunities and risks better ahead.

The Use of Alternative Data for the Pandemic

Since the advent of the pandemic and the spread of the coronavirus, investors and businesses have begun to value the importance of predictive analytics and data. Naturally, this has led to the growing use of alternative data. Traditional sources of corporate weekly and monthly reports are no longer used to make decisions by fund managers because managers are looking for real data and make their decisions based on website search information, credit cards, satellite data, and consumer patterns. The main advantage of alternative data is its real-time applicability.

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Following the coronavirus outbreak, satellite data to control and predict areas where the virus is most prevalent has become increasingly important. The use of geolocation data to locate service centers has also greatly expanded, and geolocation dataset providers have made significant gains in this regard. The internet has also emerged as a vital tool for consumers and investors. Alternative datasets retrieved from user searches on the internet provide valuable findings for investors and fund managers to predict consumer behavior.

Datasets Used By Funds

In general, funds typically utilize four types of datasets, although they are not limited to these alone. The use of these datasets has increased after the spread of the pandemic.

  1. Web-Based Data – Information sources related to these datasets include websites, applications, users’ points of view through comments, social networks, product reviews, job search news, news about companies, and the like. To this end, dataset providers provide companies with the data they need by evaluating consumer perspectives and analyzing the sensitivity of market trends.
  2. Satellite imagesSatellite images of mailboxes, farmland, mines, and ports, presented in various forms, have many benefits for investors, companies, and hedge funds. Investment fund professionals use this data for economic analysis of activities in multiple sectors and make investment decisions. Today, many companies produce this dataset and make it available to their customers.
  3. Geolocation data — Today, the use of geolocation data from mobile phones are widely used. Tracing consumers in stores, restaurants, and hospitals provides valuable information about real-time corporate performances, market behavior, and other corporate information.
  4. Credit Card Data — Most of the alternative data relates to debit and credit card data. These datasets integrate real-time transaction information and reflect trends in consumer behavior. Hedge funds make good use of this data to analyze the behavioral patterns of investors.

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Making Use of Alternative Data

Today, the use of alternative data has had a profound effect on managers’ decisions, and ultimately their effects on the economy have become more pronounced. In general, the images and activities of individuals retrieved from the satellite can inform companies on social networks to assess consumer behavior.

Companies use alternative datasets to predict customer behavior and thus more accurately assess business risks. Geolocation data also tracks the movement of individuals in society, thereby providing accurate estimates of their patterns of behavior. Companies generally use alternative data to predict future risks and opportunities. Moreover, alternative data rather than traditional data, provide a fund with the ability to provide an accurate understanding of market changes.

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