The Divergence Of GE And The S&P 500

Watching the movement of the stock prices of individual companies change with respect to one another can be a lot like watching the flight of a flock of starlings.

Imagine, if you will, a flock made of the stock prices of the individual companies that compose a stock market index like the S&P 500 (Index: INX). A lot of the time, most of the individual stocks will move in the same direction as the overall index itself, which makes sense – a market capitalization-weighted index like the S&P 500 is going to tend to go in the direction that most of its component stocks are going.

But sometimes, a bird breaks away from the flock and flies its own course – almost independently of all the other birds. Which brings us to what the stock price of General Electric (NYSE: GE) has been doing since the middle of February 2018.

As it happens, the last time we talked about GE was back on 24 January 2018, right before the S&P 500 peaked on Friday, 26 January 2018 and embarked on a 10.5% correction, so we’ve been following its trajectory with respect to the index with some interest. The following chart shows GE flying a very different path than all the other birds of a feather flocking together in the S&P 500.


We’re fascinated whenever we see the stock prices of companies striking out in different directions than the market indices in which they’re grouped, where the divergence of GE, which has continued in correction while the S&P 500 has itself rallied and recovered a good portion of what it lost during the recent correction calls for some explanation.

To get that context, we mined news sources to identify stories that would have influenced investor perceptions of GE on the days where rather than tracking along with the S&P 500, it diverged from it, where we’re looking at the period where the divergence between the two opened up to more than 2%. Here’s a quick sampling of the bad news headlines that coincide with GE’s flight path going onto such a different trajectory than the index as a whole:

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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