In yet another case of Twitter aficionados finding unpredicted uses for the social networking site, a financial engineering firm has launched a free service that helps investors make trades based on the analysis of Twitter data.
WallStreetBirds.com is the brainchild of Modulus Informatics of Scottsdale, Ariz., a sister company to privately owned Modulus Financial Engineering Inc., which has been in the business of technical analysis and charting since 1997.
“Wall Street Birds is a free service that anyone can use,” said Richard Gardner, founder of Wall Street Birds and CEO of Modulus Informatics, in a release. “Simply go to the site, register, type in a company name and instantly receive stock signals based on real-time Twitter analysis. Users are made completely unaware of the mathematical and technical complexities behind the scenes, which was our goal.”
University Research Inspired Startup
Modulus launched www.wallstreetbirds.com after studying joint research published by the computer schools of Indiana University and the University of Manchester (U.K.). “Twitter mood predicts the stock market,” published in the March edition of the Journal of Computational Science, shows that social media have an exceptionally high accuracy rate at predicting the stock market.
According to the publication’s research highlights, “public mood states” in seven different dimensions of mood are measured from the text content of large-scale Twitter feeds.
“Daily variations in public mood states show statistically significant correlation to daily changes in Dow Jones industrial average closing values,” the university researchers write, adding that certain dimensions of public mood states, in particular “Calm,” increase the accuracy of “a Self Organizing Fuzzy Neural Network model” in predicting up and down changes in DJIA closing values to 87.6%.
Hedge Funds Targeted
Those findings, Modulus asserted in a news release on Monday, have spawned a variety of social media hedge fund startups in addition to Wall Street Birds. While Modulus hopes to attract individual investors, it is also targeting hedge funds.
For hedge funds, Wall Street Birds offers an application program interface (API) that lets users write virtual-trading scripts and programs. The API can be used to develop high-frequency trading systems based on the instantaneous analysis of social media data by Wall Street Birds.
As of Friday, the Wall Street Birds Twitter feed itself shows but one tweet—“Wall Street Birds is now live”—and a mere 50 followers since the startup site launched Monday. Followers of @wallstreetbirds are so far a mixed bag of entrepreneurs, traders and arbitrageurs, digital marketers, quantitative finance students, web developers and gadget enthusiasts.
To be sure, the creators behind Wall Street Birds are not the first to have figured out the benefits of using Twitter to make stock trades. StockTwits, for example, a New York-based firm that created the Twitter prefix “$”for stocks—for example, $MSFT—had 8,280 stock-related tweets and 129,082 Twitter followers as of Friday.
Read Mastering Social Media at AdvisorOne.com.