Sentiment vs Price — Correlation and Statistics

Sentiment-Price Correlation in AI Analysis

Beyond price action, the AI Chart Analysis includes a dedicated section on sentiment-price correlation statistics. This is where the analysis moves from "what happened to price" to "what did sentiment say, and did it agree?"

Metrics the AI Reports

The AI receives and interprets several sentiment metrics:

• Average LLM Sentiment — the mean sentiment score from AI language model analysis across all news in the window. Ranges from -1 (extremely bearish) to +1 (extremely bullish).
• Average VADER Sentiment — the mean sentiment from the rule-based VADER algorithm, providing a second opinion.
• Sentiment Trend Direction — is sentiment rising, falling, or flat over the period?
• Sentiment-Price Correlation — how closely do sentiment and price move together?

Leading and Lagging Analysis

For timeframes of 7 days or longer, the AI also receives leading/lagging analysis data:

• Best Lag — the time offset (in hours) where sentiment and price show the strongest correlation.
• Correlation Strength — how strong that relationship is at the optimal lag.

This is a simplified version of what Correlation Sweep computes in SentiLab, but delivered automatically as part of the chart analysis. It tells you whether sentiment has been leading or following price for this particular asset in the recent window.

How the AI Interprets the Data

The AI doesn't just report numbers — it contextualizes them. A typical interpretation might read:

"Sentiment has been moderately positive (+0.25 avg LLM) while price declined 3.2%, suggesting a sentiment-price divergence. This pattern often indicates either that the market is ignoring positive news, or that sentiment has not yet adjusted to the price reality."

Divergence Signals

Divergences are where the most interesting insights emerge:

• Positive sentiment + falling price — the market is declining despite optimistic news coverage. This can signal a potential reversal upward (contrarian logic: the sell-off may be overdone if fundamentals remain positive).
• Negative sentiment + rising price — the market is climbing despite bearish news. This can signal a potential reversal downward (the rally may be running on fumes if narratives are turning negative).

Convergence Signals

When sentiment and price trend in the same direction, the AI notes this as convergence:

• Both rising — bullish trend supported by positive news. Likely to continue.
• Both falling — bearish trend reinforced by negative coverage. Downside likely to persist.

Convergence doesn't generate contrarian signals, but it confirms the strength and consistency of the current trend.

Sentiment Volatility

The AI also notes sentiment volatility — how much variance exists in the sentiment scores. High variance means conflicting narratives: some sources are bullish, others bearish. This typically occurs around contentious events (regulatory decisions, controversial protocol upgrades, contested earnings reports).

High sentiment volatility combined with low price volatility can precede a breakout — the market hasn't decided which narrative to follow yet.

Practical Application

Use the sentiment-price section of AI analysis to quickly assess whether the current narrative supports the current price trend. If you see a strong divergence, dig deeper: check the News Impact Table section to understand which specific stories are driving sentiment, and run a Correlation Sweep in SentiLab to quantify the relationship over a longer time horizon.

Why This Matters

Price charts tell you what happened. Sentiment tells you what people think about what happened. The gap between the two — divergence or convergence — is where the actionable insight lives. The AI Chart Analysis delivers this comparison automatically so you don't have to calculate it yourself.