Peer Read-Through Correlation

Overview

Analyzes how a company's stock price reacts to the earnings reports of its key competitors and partners. This pillar helps forecast 'sympathy moves' by quantifying the historical correlation between peer companies.

What It Does

This pillar identifies a 'lead' company in an industry that reports earnings early. It then analyzes the lead company's results, specifically the magnitude of its earnings beat or miss. Using historical data, it calculates the statistical correlation between the lead company's results and the subsequent stock price movement of a 'follower' company that has yet to report.

Why It Matters

It provides a predictive edge by generating a data-driven forecast for a stock's earnings reaction before its own report is public. This allows traders to position themselves ahead of an anticipated move based on fresh, relevant industry data from a peer.

How It Works

First, the system identifies a target company and its key peers with earlier earnings dates. When a peer reports, the pillar ingests the earnings surprise data. It then queries a historical database to find how the target company's stock previously reacted under similar circumstances. Finally, it generates a projected price movement and a confidence score based on the strength of the historical correlation.

Methodology

The core calculation uses a 3-year rolling Pearson correlation coefficient between the lead company's EPS surprise percentage and the target company's stock return over the following 48-hour trading window. The model is adjusted for the target company's industry beta to normalize for broader market sentiment and sector-wide movements. Supply chain links identified in 10-K filings are given a higher weight in the peer selection process.

Edge & Advantage

This pillar moves beyond single-company analysis to leverage information leakage between correlated companies, giving an edge before the market fully prices in the news.

Key Indicators

• Competitor Beat/Miss Correlation

  high

  Measures how strongly the target stock's price moves in response to a peer's earnings surprise.

• Guidance Read-Through

  high

  Analyzes the impact of a peer's forward-looking guidance on the target company's stock.

• Supply Chain Cross-Read

  medium

  Assesses the impact from a major supplier or customer's results, indicating demand shifts.

Data Sources

• FactSet / Refinitiv

  Provides institutional-grade consensus earnings estimates, actuals, and corporate relationship data.

• Company SEC Filings (EDGAR)

  Official source for earnings reports and identifying key customers or suppliers in 10-K reports.

• Polygon.io

  Provides real-time and historical stock market data for price movement analysis.

Example Questions This Pillar Answers

• → Will AMD's stock close up the day after Intel reports its Q4 earnings?
• → Will Target's stock price increase more than 2% in the week following Walmart's earnings call?
• → Will the price of the Invesco QQQ ETF ($QQQ) be higher or lower 24 hours after Apple releases its quarterly results?

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