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Commodity Investing 2.0: Leveraging Alternative Data for Competitive Edge

What kind of alternative data should you use to invest in commodity futures?

Mar 20, 2024

Commodity Investing 2.0: Leveraging Alternative Data for Competitive Edge

Because of macroeconomic conditions, we’ve seen an increasing amount of clients add commodity data to their watchlist. 

The key question we keep being asked here is - what kind of alternative data can I use to invest in commodity futures? Neudata associate Konstantinos Vafeidis explains:

To put it short, commodity flow data and commodity inventory data are likely the two safest ways to answer that question. To be more specific, commodity flow data tracks the flow of individual commodities from port to port and country to country, while commodity inventory data measures the existing inventory of commodities like crude oil in given hubs. 

The competitive advantages that these two datasets share are that:

1. they are both delivered in high frequency and can therefore accommodate both quantitative and discretionary trading strategies, and,

2. they both leverage satellite data as an underlying data input, which allows them to map their data points to individual hubs. As such, the data is directly applicable to any strategy that trades hub-specific futures. 

Of course, this market, too has its fair share of disruptors. Historically, we’ve seen providers leveraging the emails of maritime professionals in order to forecast commodity flow movements globally. 

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