What Is Market Similarity?

A long-term signal that ranks a stock on how closely a stock mirrors the “market” based on the performance of the S&P 500 index. It does not distinguish between the direction of a stock’s price (up or down). A high number just means it is moving with the market. A low number means it is likely to outperform or underperform vs. the market. Use this signal with others to decide to buy, hold, or sell.

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How to use Market Similarity?

Market Similarity ranges from 0 to 100 and can be examined for a certain stock or an aggregation of stocks such as ETFs.

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A High Market Similarity (80+) indicates movement very close to the S&P 500, both in direction and amount.

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A Low Market Similarity (20 or less) indicates stock price movement that significantly deviates from the movements of the S&P 500. This implies higher risk, as it means there is a higher potential for deviation from the market's performance. It also means a potential higher reward.

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A portfolio with low Market Similarity could provide some insulation against losses in a market crash. It could also prevent it from benefitting when markets boom.

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It is essential to research historical tracking patterns, as stocks might be similar to the S&P 500 in rising markets but not during falling markets.

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Update Frequency and Usage for Market Similarity

Market Similarity updates once per day. It doesn't move too fast and as a result, is good to leverage whenever you see the number.