A question regarding Sentiment score

General
1

Hello there:



  I have seen that  in some courses  in Quantra, there is a library on python called Vader, that is used for  scoring news…



Now I was wondering… if this scoring could be used as an indicator when considering to enter a trade… that means… if this scoring is near 1  , let's say above 0,8 ;  It can be considered as an argument to go long on a particular stock  (of course this would not be the only one…)



Also I wonder  How does Vader actually come with this number…??  what about all the scores?,  that is  the neg, the neutral and the positive ??





Thanks

2

Hi Ghery,



Yes, you can use it as an additional signal to enter trades. Treating values above 0.8 as a bullish (long) indicator and scores below -0.8 as bearish makes sense. This compound score is a normalised metric that combines Vader’s individual positive, negative, and neutral sentiment scores, weighing them to give an overall sentiment ranging from -1 to 1.



Vader's scores are calculated based on a lexicon and rule-based approach:

  1. Positive, Negative, Neutral Scores: Each score represents the proportion of words in the text that are classified as positive, negative, or neutral. These are calculated based on a dictionary of words that Vader knows to generally convey certain sentiments.
  2. Compound Score: This is the primary score to use, as it integrates the other three. It is a weighted sum of these scores, normalised between -1 and 1, representing the text’s overall sentiment intensity.



    If you want to learn more about Vader you can refer to this paper.



    Hope this helps!



    Thanks

    Rushda