What to compare
Performance over the same periodCompare two sectors over exactly the same period. A month for one and a year for the other is not a fair comparison.
Risers and fallersHow many companies rose and how many fell inside the sector. It shows whether the move is broad or concentrated.
LiquidityThe traded value in the sector's companies. In a sector with little traded value, prices can move on small quantities.
ValuationMeasures such as P/E differ naturally between sectors, so compare a company with its sector before comparing it with the whole market.
Look inside the sector
ExampleAn invented sector of 4 companies. A large one rose 12% and the other three fell 2% each. The simple average = (12 − 2 − 2 − 2) ÷ 4 = +1.5%. The sector figure is up, even though 3 of the 4 companies fell.
Large company
+12%
Company 2
−2%
Company 3
−2%
Company 4
−2%
Simple average+1.5%3 of 4 down
If the sector figure is weighted by company size, the large company counts even more. So before saying "this sector is up", check how many of its companies actually rose.
A description, not a verdict
Watch outA sector that rose last month describes what happened; it does not mean it will continue. A falling sector does not mean all its companies are weak. Use the comparison to understand the market, not to choose based on the latest move.
Compare the sectors yourself
The sectors page lists the sectors and the companies in each. Open one and look at the companies inside.
Check yourself
1. A sector of 5 companies: one rose 15% and four fell 1% each. What is the simple average?
(15 − 4) ÷ 5 = 11 ÷ 5 = 2.2%.
2. Why compare a company's P/E with its sector?
Businesses differ, so comparing within a sector is fairer.
Summary
- Compare sectors over the same period, along with liquidity and valuation.
- Check how many companies rose and fell, since one company can move the sector figure.
- A sector's performance describes the past; it is not a forecast.