Use of Big Data analytics tools is picking up fast among enterprises and markets such as Twitter–which sells its users’ tweets in a number of packages–are becoming ever-more valuable resources. Some however managed to extend the insight they receive from individuals’ 140-charcater messages far beyond marketing. Hedge fund firm Derwent Capital is leaning on Twitter to gauge user sentiment, and makes investments accordingly. So far, that has been paying off.

“Using an algorithm based on the social media mood that day, the hedge fund predicted the market to make the right trades. Sounds unbelievable that something cluttered with mundane musings and media links could have anything smart to say about the market. But it’s working so far. “

The algorithm has academic backing–it’s based on research carried out by scientists from the University of Manchester and Indiana University. The paper claims that the number of emotional words used on Twitter can allow someone to predict indexes with a 87.6 percent accuracy rate.

Specifically, Derwent Capital takes a look into the amount of words that fall under the “calm” mood category, and makes its estimate based on that. The newly founded hedge fund plans on expanding to other indexes as well, including the  FTSE 100, FTSE 250 and Dow Jones Industrial Average.

The connection between Twitter’s emotional weather and the stock market as laid out by Derwent seems to be a rather flexible one. But, Twitter is indeed a powerful source of big data and consumer insight used by companies to measure brand reactions and more. Our own Cherr Aira wrote it all down in an analysis here.

The instant messaging service also proved itself on a much smaller scale. News of Osama bin Laden’s death broke on Twitter first, triggering a tsunami of tweets and one serious misunderstanding.