Are the stocks of competitor companies negatively correlated?
Not especially. It depends on why sales have changed. If it's just consumer demand, that affects everyone in parallel rather than pushing in opposite direactions. If it's changes other than sales, that may have no effect on other companies. If it's because someone introduced the next must-have-it device and they're selling rapidly and drawing customers from the competing brands, maybe. And that's all neglecting the fact that this may already have been incorporated into the competitor's share price long ago, in anticipation of this news. Sorry, but the market just ain't simple. "It is important to first understand that true causation of share price may not relate to historical correlation. Just like with scientific experiments, correlation does not imply causation. But we use stock price correlation to attempt to infer causation, where it is reasonable to do so. And to do that you need to understand that prices change for many reasons; some company specific, some industry specific, some market specific. Companies in the same industry may correlate when that industry goes up or down; companies with the same market may correlate when that market goes up or down. In general, in most industries, it is reasonable to assume that competitor companies have stocks which strongly correlate (positively) with each-other to the extent that they do the same thing.  For a simple example, consider three resource companies: ""Oil Ltd."" [100% of its assets relate to Oil]; ""Oil and Iron Inc."" [50% of its value relates to Oil, 50% to Iron]; and ""Iron and Copper Ltd."" [50% of its value relates to Iron, 50% to Copper]. For each of these companies, there are many things which affect value, but one could naively simplify things by saying ""value of a resource company is defined by the expected future volume of goods mined/drilled * the expected resource price, less all fixed and variable costs"". So, one major thing that impacts resource companies is simply the current & projected price of those resources. This means that if the price of Oil goes up or down, it will partially affect the value of the two Oil companies above - but how much it affects each company will depend on the volume of Oil it drills, and the timeline that it expects to get that Oil. For example, maybe Oil and Iron Ltd. has no currently producing Oil rigs, but it has just made massive investments which expect to drill Oil in 2 years - and the market expects Oil prices to return to a high value in 2 years.  In that case, a drop in Oil would impact Oil Inc. severely, but perhaps it wouldn't impact Oil and Iron Ltd. as much. In this case, for the particular share price movement related to the price of Oil, the two companies would not be correlated. Iron and Copper Ltd. would be unaffected by the price of Oil [this is a simplification; Oil prices impact many areas of the economy], and therefore there would be no correlation at all between this company's shares. It is also likely that competitors face similar markets. If consumer spending goes down, then perhaps the stock of most consumer product companies would go down as well. There would be outliers, because specific companies may still succeed in a falling market, but in generally, there would be a lot of correlation between two companies with the same market.  In the case that you list, Sony vs Samsung, there would be some factors that correlate positively, and some that correlate negatively. A clean example would be Blackberry stock vs Apple stock - because Apple's success had specifically negative ramifications for Blackberry. And yet, other tech company competitors also succeeded in the same time period, meaning they did not correlate negatively with Apple." "In theory, say we had two soft drink companies, and no other existed. On Jan 1, they report they each had 50% market share for the past year. Over the next year, one company's gain is the other's loss. But over the year, for whatever reason, the market has grown 10% (all the stories of bad water helped this), and while the market share ends at 49/51, the 49 guy has improved his margins, and that stock rises by more than the other.  In general, companies in the same industry will be positively correlated, and strongly so.  I offer my ""spreadsheets are your friend"" advice. I took data over the last 10 years for Coke and Pepsi. Easy to pull from various sites, I tend to use Yahoo. In Excel the function CORREL with let you compare two columns of numbers for correlation. I got a .85 result, pretty high. To show how a different industry would have a lower correlation, I picked Intel. Strangely, enough, Intel and Pepsi had a .94 correlation. A coincidence, I suppose, but my point is that you can easily get data and perform your own analysis to better understand what's going on."
"The correlation I heard most about in economics/finance was that stock prices and bond yields were negatively correlated; as the stock market does better, bond yields fall (company's doing well as evidenced by stocks, so it's a good credit risk, so YTM of its bonds on the market goes down). The correlation, if any, between the stock and futures market should be visible in the actual price histories. Index prices may be useful, but what's more likely is that various future prices have correlation with various companies' stocks. Where the future reflects the price of a raw material that is a significant cost of goods sold for a company, you'll see these two move inversely to each other in the short term. I think that if there is a causative relationship here, its that futures prices influence stock prices, not the other way around. The futures market generally represents the cost side of a consumer goods producer's bottom line. The stock market represents its profits. As futures go up, profit expectations go down, putting pressure on stock prices. Industries that deal in services, or in other types of goods, can still be affected because a rise in the cost of something consumers need will cause them to spend less on other things which affects margins in those other areas. So, in the short and medium term, when the futures market goes up the stock market sees a dip, and vice versa.  However, companies adapt; they can put upward pressure on prices for their goods to restore their desired margins, usually by slowly increasing them to prevent sticker shock (though elasticity of demand plays a part; the more we need something no matter what it costs, the faster prices can increase). To maintain costs, they can make things cheaper using less expensive materials (more plastic, less steel). They can restructure production processes (translated: move factories offshore, or at least to ""right-to-work"" states with less union strength) to save costs elsewhere. All of these reduce costs and thus increase profits, but take time to implement. Many of these things reduce direct costs, reducing demand for the commodity and causing the futures prices to go back down. So, over the long term, these differences even out, and it's down to the things that affect the entire market (inflation, consumer/investor confidence, monetary policy)." This depends very much on why A is making massive losses and how big they are in relation to B. If the group has a history of successfully launching profitable brands, and A is a new brand that has high expenses (production, marketing, etc.) but not yet generating much revenue, then despite the current losses it can be seen as a source of future profits. Or A might be established but currently undergoing an expensive remodelling that promises future success. Or B might simply be a huge cash cow that funds the losses of A out of petty cash. Its pretty much always a positive to have large institutional investors. Here's a few cases where I can see an argument against large institutional investors: In recent years, we've seen corporate raiders and institutional investors that tend to influence management in ways that are focused on short term gain. They'll often go for board seats and disrupt the existing management team. It can serve as a distraction and really hurt morale. Institutional investors also have rules in their prospectus that they are required to abide by. For example, some institutional investors will not hold on to stock below $5. This really affected major banking stocks, some of which ended up doing reverse stock splits to keep their share price high. Institutional investors will also setup specific funds that require a stock to be listed as part of an index (i.e. the SPY, DJIA etc.,). When a stock is removed from an index, big investors leave quickly and the share price suffers.  In recent months, companies like Apple have made their share price more affordable to attract retail investors. It gives an opportunity for retail to feel even more connected to the company. I'm not sure how much this affects overall sales... Generally, a good stock should be able to attract both retail and institutional investors. If there's not a good mix, then its usually a sign that somethings amiss. "Sure, and I made it clear in my post that I'm willing to accept that I may be wrong.  But the author does a poor job of arguing his point, his argument in the article is based on an unsubstantiated claim that a certain activity is bad. He says it ""impairs price performance"" but offers no proof that this occurs.  Now granted, I haven't had a chance to look at the data either, but as myself and other posters have mentioned, this claim is quite debatable. I need a bit more material to be convinced." "I am doing an assignment for a finance class, and I am writing a recommendation for a specific capital structure. One of the concerns brought up by the ""board of directors"" was interest coverage, so in my addressing that topic in my report, I want to compare to competitors. The interest coverage ratio under this capital structure that I'm choosing is 11.8 and the two competitors we are given information on are Company A (who has an interest coverage ratio of 6.67) and Company B (who has an interest coverage ratio of 11.25). It seems good, but my concern is that I may be missing something, as Company A is similar in size (in terms of sales) to the company I am writing a report for while Company B has ~50 times more sales than the company I am writing a report for.   Advice, things to consider as I move forward?" You question is very hard to answer as it is tough to put a value on how much bad your added investment in evil companies would cause and also how much value the charities add.  However, there has been a bunch of really good work on socially responsible investing in general.  This paper might be too technical for some but the conclusion section is very readable and clear. The big worry about socially responsible investing from a financial standpoint is that it will lower returns in the long run.  The paper above and others show fairly clearly that as long as you only exclude a few classes of stocks and still have a fairly broad base that the expected returns are similar.  The main issue though is some socially responsible funds have much higher fees. So the usual advice applies, do your research to make sure your investments are well diversified and have low fees.   As long as the index is fairly broad you can consider the difference between the fees on the socially responsible index and investing in a more common index as the long run cost.  Then you can balance that cost and having more money for charity against the benefits of not investing in evil companies. Also keep note - some companies have a combined CEO/Chairman of the board role. While he/she would not be allowed to negotiate contracts or stock plans, some corporate governance analysts advocate for the separation of the roles to remove any opportunity for the CEO to unduly influence the board.  This could be the case for dysfunctional boards. However, the alternate camps will say that the combined role has no negative effect on shareholder returns.   SEC regulations require companies to disclose negotiations between the board and CEO (as well as other named executives) for contracts, employee stock plans, and related information. Sometimes reading the proxy statement to find out, for example, how many times the board meets a year, how many other boards a director serves on, and if the CEO sits on any other board (usually discouraged to serve on more than 2) will provide some insight into a well-run (or not well-run) board. Nope, sorry.  ChemChina-Syngenta are not US companies and they couldn't care less about US when it comes to long term strategy. Chem china is also in about to merge with sino chem.  This will be by far the largest diversified company in the world. followed by BASF.  Dow Dupont, will shrink, since they have the weakest global reach, compared to Asian and european counterpart.   Bayer-Monsanso? They see the writing on the wall. Either they  look for partners quickly or become irrelevant.   There is no option. Either become bigger/more  efficient or perish. Absolutely. In fact, all stock purchases of more than 5% of a company's stock must be reported to the SEC, so assuming A and B are publicly traded companies in the US, the purchase would likely be a matter of public record.  There are probably special cases where this could cause problems, however; any case where A's purchase of B's stock (or vice versa) runs afoul of regulation would be one such case. For example, if company A wants to own a controlling interest in company B and appoint members of its board of directors and both companies were in the same heavily-concentrated market, regulators may frown on the potential for decreased competition. Such regulations may apply to any purchase of a controlling interest in a company, though. To be fair, the analyst is talking about the book value of the firm. Basically, the value of all the stuff it owns now. There are plenty of companies with negative book value that can justify a positive share price. Ford, for instance, had negative book value but positive future earnings. It's got to be a bad chunk of data on Google.  Yahoo finance does not show that anomaly for 1988, nor does the chart from Home Depot's investor relations site: Okay I don't know where my disconnect was, in my mind I was viewing that as a negative for some reason haha. Thanks! That makes sense.  What is your perspective on the large amount of companies buying back shares right now? The top ten holdings for these funds don't overlap by even one stock. It seems to me they are targeting an index for comparison, but making no attempt to replicate a list of holdings as would, say, a true S&P index. "lol, please, calculate the correlation and let me know how close to 1 it is. And then let me know what kind of sensible economic model looks like SPX Level = const + beta * Fed Balance Sheet Level. That's a great way to just throw useful statistical inference out the fucking window.  Edit: I'd also like to make it abundantly clear that this is a monumentally retarded ""correlation"" to consider in the first place. The Fed balance sheet prior to 2008 was relatively tiny and unchanging, and yet the stock market was just as volatile in prior years." if the consolidated joint venture/sub has a negative net worth, then it is backing out the minority owner's share.    if another entity is taking the hit, or responsible for a hit/liability instead of you, then it should improve your valuation.   do not confuse net worth with net income. BS vs IS.