Dr.Sam

In this article, we will delve into the concept of market return and examine how it relates to the return of major companies. By understanding this relationship, investors and traders can make informed decisions to maximize their gains. Our analysis will focus on the S&P 500 index as a measure of market return and a sample of the ten largest companies within the index, including Apple, Microsoft, American Express (AXP), Amgen, Chevron, Coca-Cola, JP Morgan, Johnson & Johnson, Merck, and Walmart.

Market Return vs. Apple Return

To begin our analysis, let’s compare the market return to the return of Apple over the past ten years. By examining the graph below, we can observe the relationship between these two variables.

It is evident from the graph that Apple’s stock exhibits a beta above 1, indicating that it tends to move more than the market. When Apple’s return falls below the market return, it often provides higher returns than the market in the following year. This presents an opportunity for investors to consider investing in Apple when its return is below the market return.

Market Return vs. Microsoft Return

Next, let’s examine the correlation between the market return and the return of Microsoft over the past decade. The graph below illustrates this relationship.

Similar to Apple, Microsoft’s stock also demonstrates a beta above 1. When Microsoft’s return drops below the market return, it often presents a favorable opportunity to invest in the stock. This strategy has proven effective in generating positive returns in subsequent years.

Market Return vs. American Express Return (AXP)

Now, let’s turn our attention to American Express (AXP) and its relationship with the market return. The graph below illustrates this relationship.

Like Apple and Microsoft, American Express’s stock exhibits a beta above 1. By investing in American Express when its return falls below the market return, investors can take advantage of potential undervaluation and anticipate higher returns in the future.

Market Return vs. Amgen Return

Moving on to Amgen, let’s analyze its return in relation to the market return over the past ten years. The graph below provides a visual representation of this relationship.

Amgen’s return also aligns with the pattern observed in previous stocks. When its return drops below the market return, it often rebounds in subsequent years, indicating the potential for profitable investments.

Market Return vs. Chevron Return

In the case of Chevron, the relationship between its return and the market return presents some unique characteristics. The graph below illustrates this relationship.

Unlike the previous stocks, Chevron’s return does not consistently follow the strategy of investing when it falls below the market return. This deviation may be attributed to the correlation between Chevron’s stock price and the price of oil. When oil prices fluctuate, Chevron’s stock price tends to follow suit.

Market Return vs. Johnson & Johnson Return

Let’s now focus on Johnson & Johnson (JNJ) and its return in relation to the market return. The graph below provides insights into this relationship.

Similar to the other stocks analyzed, Johnson & Johnson’s return adheres to the strategy of investing when it falls below the market return. The stock’s high beta causes it to move higher than the market and drop more sharply during market downturns.

Market Return vs. Coca-Cola Return

Shifting our attention to Coca-Cola, let’s examine its return compared to the market return over the past ten years. The graph below displays this relationship.

Coca-Cola’s return aligns with the previously observed pattern. When its return falls below the market return, it often experiences a subsequent increase that surpasses the market return. This presents an opportunity for investors to capitalize on undervalued stocks.

Market Return vs. JP Morgan Return

Now, let’s analyze the relationship between JP Morgan’s return and the market return. The graph below illustrates this relationship.

JP Morgan’s return follows the same trend as the other stocks discussed. Investors can consider buying the stock when its return drops below the market return and sell when it surpasses the market return.

Market Return vs. Merck Return

Moving on to Merck, let’s examine its return in relation to the market return over the past decade. The graph below provides insights into this relationship.

Merck’s return aligns with the previously observed pattern. When its return falls below the market return, it often rebounds in subsequent years, indicating a potential opportunity for investors.

Market Return vs. Walmart Return

Lastly, let’s analyze Walmart’s return compared to the market return. The graph below displays this relationship.

Walmart’s return generally adheres to the strategy of investing when it falls below the market return and selling when it exceeds the market return. However, there are instances where the stock’s return does not fully align with this pattern, likely due to the nature of the retail and wholesale industry.

Conclusion

In conclusion, comparing the return of major stocks to the market return can provide valuable insights for investors and traders. By analyzing the historical data of stocks such as Apple, Microsoft, American Express, Amgen, Chevron, Johnson & Johnson, Coca-Cola, JP Morgan, Merck, and Walmart, we can identify opportunities to invest in undervalued stocks and anticipate potential returns. It is crucial for investors and traders to conduct thorough research and make informed decisions based on the historical performance of stocks compared to the market.