A case-study of Brazil

Applying RavenPack Sentiment to Forex Trading

April 25, 2023

A recent study on Forex trading shows combining RavenPack news sentiment and fundamental input variables in a Machine Learning model improves predicting USDBRL's 21-day return.

Applying RavenPack Sentiment to Forex Trading image

The study by Alex Giulietti de Barros, Felipe Honório and Emerson Fernandes Loureiro showed that sentiment data has predictive power when applied to forex trading over a 21 days horizon. The news sentiment was pre-processed and combined with fundamental data, and a basket of emerging market currencies.

In particular, they found that:

  • The sentiment-enhanced model outperformed the benchmark in every year between 2016 and 2020, with a Sharpe Ratio of 2.27 vs. 0.05 for the benchmark.

  • Results showed that RavenPack news sentiment was able to enhance the strategy performance, both relative to a buy-and-hold strategy, as well as to a pure fundamental model.

  • chart overall returns

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