Some Introduction on AI/ML
I would like to start this new thread as I could not found relevant thread on the above topic. On day to day basis we are hearing about Artificial Intelligence and Machine Learning impact on our lives. If you are using Smart Phone you are pretty much getting affected by various segments of AI/ML. As per latest announcements Google has come up with some enhancements to its Assistant platform which uses AI at the backend and now it is more powerful and able make human like interactions over a voice call. We also familiar with Amazon Alexa for taking voice commands using Alexa. When we get recommendations on our mobile apps for purchasing so and so product on any E-commerce or Social Networking platform then AI is working at the background.
In this thread I would like to add some pointers on how we can use to improve our decision making process, it may be stock selection or sector analysis or prediction of stock/index movement for the future. I will try to summarize in as much as layman’s language. I would like to disclose that am also tinkering around AI and ML and not an expert.
Some info on Machine Learning
Machine Learning is a subset of Artificial Intelligence. We have to feed the data to the ML programs to derive outputs. ML uses various type of algorithms and try to throw the results. It is an adaptive system which can train itself as more and more data gets added in the system just like human brain works. It can be used for Predictive Analysis, Anomaly Detection, Fraud Detection, Recommendations. Anomaly and Fraud Detection can mainly be used in Financial Sector for Credit card fraud or Loan fraud. The Recommendations are mainly used in E-Commerce for recommending various products depending on user behavior. In Financial sector Predictive Analysis can be used to predict the future performance of stock price or Index or currency.
There are again different uses cases of ML like Image Recognition and Natural Language Processing. In Image Processing objects can be identified in picture or video and that captured data can be used for taking other decisions. Using Natural Language Processing, human conversation is captured and that data is used for taking decisions. Example of NLP can be analyzing the sentiments of people of a new product company has launched. The data source for NLP can be news feed from various News Papers or Twitter Feed.
Some concepts in AI/ML can be useful for Decision Making and Predictive Analytics. I am right now tinkering on two ideas one for using NLP to analyze the sentiments related to a company or sector or a product and second one is Predictive Analysis of Stock Price.
Now coming to the actual use case of NLP, Amazon has launched a product called Amazon Comprehend for Natural Language Processing few months back. I am trying to use the same to analyze the sentiment of a promoter/owner of the company regarding the future strategy of the company, industry overview. The Amazon Comprehend right now allows to use up to 5000 words and predicts the Entities, Key Phrases and Sentiments in the posted words. The sentiments can be Neutral, Positive, Negative and Mixed. It supports API as well and continuous feeds can also be given to analyze the data on real-time basis. Depending on the Analysis Comprehend throws the results. Here the data which you are inserting for analysis is important to gain the insights from it. In my model I tried to analyze the sentiments of Promoter/Owner of the company during the quarterly concall.
Analysis of Bajaj Finance and Rain Industries Q4 2018 Concall using Amazon Comprehend NLP
I used two companies here. One disclosure here, as I am not recommending any positive/negative about these companies here and just wants to showcase the use case. The results may be wrong as well but in near future we will be able to use it more aggressively as it adds more features and functionalities.
Why I used the above two companies? Bajaj Finance is giving good showing growth Quarter on Quarter and overall mood seems Bullish and Rain Industries in recent quarter has come up with not so good results and stock price has also come down.
Bajaj Finance Test
As you know Bajaj Finance is posting good results Quarter on Quarter. I wanted to test if it is getting reflected in the speech of his MD(Rajeev Jain). I am pasting the results of the same here. Here I copied the statements of Mr. Rajeev Jain from Q4 2018 Concall and pasted it inside the Amazon Comprehend dialogue box and analyzed. I had to post the data in two sets as the existing limit of Comprehend is to accept 5000 words only. Here Amazon Comprehend is showing 0.23 Positive in first data capture and 0.36 Positive in second data capture.
Rain Industries Test
In the Q4 Concall of Rain Industries Mr. Jagan Mohan Reddy has given a Company Overview and Mr. Gerald has given Industry Overview. I separately posted the statements of both these guys inside the Comprehend. I got 0.19 Positive for Mr. Jagan Mohan Reddy who has given a Company Overview and 0.03 and 0.06 Negative for Mr. Gerald who has given Industry overview. Here, I am not coming on a conclusion that there is something Negative about the company. I am just throwing the results which I have got during the tests. These results may be wrong also as I am just exploring the possibilities with AI/ML.
Mr. Jagan Reddys Statement on Company Overview
Mr. Geralds Statement on Industry Overview
The second use case I am working on it is the Predictive Analysis of a Stock Price of a Company. First to admit here is that the short term and long term movement of stock price of any company is hard to predict as it has many factors which affects it, ranging from Micro to Macro. Right now I am working on some concepts with one of my friend who is active in Trading. I am using Amazon Machine Learning as I find it easy compared to other products. If any Data Scientists has used or using any other tools then please share the same so we can work jointly.
Some of the resources which may be useful to explain the concepts
Stock Prediction using Machine Learning - Suchit Majumdar
Machine Learning meets Stock Trading
Disc: I do not have holdings in Bajaj Finance and Rain Industries. The tests are shown for learning purpose only