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The end to end challenges of evaluating alternative data

And how Exabel and Eagle Alpha have partnered to solve them

The end to end challenges of evaluating alternative data

Whether you are a quantitative analyst on the hunt for new signals with alpha potential, or a fundamental investor looking to complement your current perspective on the long-term performance potential of a basket of target stocks, the answer lies in sourcing new ‘alternative data’ that can tell you something new; to improve the sharp ratio of your strategy, or improve the prediction error of your models, or give insight into a specific KPI your hypothesis tells you is a leading indicator of market performance. In the 2021 Buyside survey conducted by Eagle Alpha respondents noted that data discovery and prioritization of alternative datasets ranked as the overall second highest challenge for both recent adopters of alternative data and for the majority of experienced firms.

For many buy-side firms the process of sourcing data and evaluating potency remains a major headache; the challenge is how to do it at scale, across multiple datasets, systematically, when everyone is already busy. In their report Eagle Alpha concluded that firms need to have a strategic approach to data sourcing and noted that experienced firms are more likely to have actively begun outsourcing some of their data sourcing functions. This conclusion was confirmed in the Nasdaq data link report of Dec 2021

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Fig. 1: Asset Managers are Already Outsourcing Many Data Functions (Source:  Nasdaq Data Link)

Unpacking the data evaluation challenge

This challenges of data discovery and evaluation are multi faceted, including a number of both operational and technical barriers:

  • Quantity - with over 7,000 datasets in a constantly changing market, it’s hard to parse through and find the gems
  • Compliance - potential buyers must pass through substantial due diligence hoops to get hold of trial data before even commencing evaluation.
  • Contracting - Negotiating individual contracts from scratch with each data vendor is time-consuming, subject to legal resource bottlenecks.
  • Operational Risk - there is a cost involved in buying data, and buyers desire certainty before making the investment.
  • Data Engineering - data ingestion, cleansing, entity mapping and data modelling all take up valuable time from specialist resource.
  • Tooling - in the absence of purpose built, dedicated tools the process of identifying potential value in a dataset is a painful, repetitive process, strung out across a chain of time-poor resources and technology.

Exabel and Eagle Alpha partner to deliver the solution.

Exabel and Eagle Alpha’s partnership takes on this challenge end to end. By combining Eagle Alpha’s deep knowledge and expertise in alternative data ecosystem with Exabel’s powerful analysis platform, investment teams can finally tackle these operational and technical challenges holistically, delivering efficient data evaluation, at scale.

Here’s how it works:

  • Investors browse Eagle Alpha’s 1,650 alternative datasets profiled to FISD standards, utilising Eagle Alpha expert consulting and on-line platform to accelerate the process of scouting for new potentially potent data sets.
  • With 600+ DDQs completed, time-stamped and maintained, Eagle Alpha dramatically reduces data compliance checks on the buyers behalf.
  • Contracting for trial data is streamlined with Eagle Alpha’s unique approach to pre-agreed template contracts with buyside firms, tuned to data evaluation
  • By leveraging the cloud-based Exabel platform evaluation of data remains at ‘arms length’ outside the buyer’s firewalls, reducing internal IT Security approvals
  • Eagle Alpha data engineers ingest test data into the Exabel platform, cleaned, mapped and organised, removing the data-engineering friction for the buyer.
  • Data is delivered  into the buyer’s dedicated, secure namespace in the platform. The evaluation project is teed up, ready to go.
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Fig. 2: The Exabel Platform Architecture 
  • Using Exabel’s purpose built data research and analysis modules, buyers rapidly execute systematic evaluation processes, from aligning alt data signals to target company KPIs, and testing their predictive power, to signal alpha testing and strategy backtesting.
  • Evaluation projects are supported with Exabel’s on-call expert assistance and best practice data evaluation guides, to rapidly make go/no go buying decisions.

The end to end data trial process

Fig. 3: Combined Eagle Alpha/Exabel end to end data evaluation process 

All of which makes for rapid, low risk and cost effective, alternative data evaluation -  at scale.

If you would like to learn more, sign up to the jointly sponsored webinar panel discussion from Eagle Alpha and Exabel on Alternative Data Evaluation here.

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Exabel is a financial technology company based in Oslo, London, and New York.

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