NLI

NLI COMPOSITE is the measure of market sentiment according to our interpretation and calculated with the instruments and technologies developed by our R&D laboratory

Generally an index is a value that expresses, in a synthetic way, the trend of a certain market. An investor who wants to get an immediate idea of how a certain market is behaving has the possibility to verify the index that best represents that market if he does not want to do the controls manually in an autonomous way.

Index Composition

Let’s look at 3 particular financial instruments that best represent market sentiment, in terms of ‘greed and fear’, and its behaviour, in terms of risk or savings propensity.

However, the two indicators selected must be strongly correlated in order to better express the above mentioned market sentiment/behavior pair. The correlation is measured periodically in order to find the optimal time period. This is done in different ways (traditional and with the use of AI techniques) for a greater control over the relationship of the assets of which the index is composed. At the end there is the best time period functional to the final calculation of the NLI.

Then for each asset the historical data resulting from the correlation analysis are extracted. These will then be treated with Data Mining techniques before being compared with each other.

Index Calculation

The pre-calculation phase consists in reporting the sets of values on the same scale, each on a scale from 0 to 100, from here we proceed to find the reference values. Following the same logic, these are also reduced in scale.

For each indicator, we examine how far they have deviated from their average with respect to how far they normally deviate. The higher the reading, the greedier the investors are and 50 is neutral.

Once all indicators have been weighted, we proceed to the final calculation of the index.