{"id":33147,"date":"2021-10-05T18:58:31","date_gmt":"2021-10-05T18:58:31","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=33147"},"modified":"2026-08-29T14:34:56","modified_gmt":"2026-08-29T14:34:56","slug":"compare-methods-by-which-companies-can-be-grouped","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/equity\/compare-methods-by-which-companies-can-be-grouped\/","title":{"rendered":"Compare Methods by which Companies can be Grouped"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/labqtlwTF_c?si=IRib0QnAM6QKfKWX\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Products and\/or Services Supplied<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The most widely used industry classification method is the grouping of companies offering similar products and\/or services. A company\u2019s classification is usually based on its principal business activity or the source from which the company derives a majority of its revenues or earnings. Sectors are used to describe a group of related industries.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Business-Cycle Sensitivities<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Companies are sometimes grouped as cyclical or non-cyclical (defensive), depending on the company\u2019s relative sensitivity to the business cycle. A cyclical company is one whose profits are strongly correlated with the strength of the overall economy and generally experiences above-average profit variability. Examples would include automotive, construction, heavy equipment, and airline industries.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A non-cyclical company is one whose performance is largely independent of the business cycle, such as a public utility company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Statistical Similarities<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Statistical approaches group companies based on the correlations of past securities\u2019 returns, often forming non-intuitive groups of companies through cluster analysis.<\/p>\n\n\n\n<div style=\"text-align: center; margin: 30px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\"\n     target=\"_blank\"\n     rel=\"noopener noreferrer\"\n     style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\">\n    Start Free Trial \u2192\n  <\/a>\n  <p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">\n    Master company grouping methods, equity classification approaches, industry analysis, and investment evaluation concepts with our CFA Level I study materials and practice tools.\n  <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Products and\/or Services Supplied The most widely used industry classification method is the grouping of companies offering similar products and\/or services. A company\u2019s classification is usually based on its principal business activity or the source from which the company derives&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-33147","post","type-post","status-publish","format-standard","hentry","category-equity","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Methods to Group Companies in Equity Analysis<\/title>\n<meta name=\"description\" content=\"Explore methods to group companies, by products\/services, business-cycle sensitivity, statistical traits, in equity analysis for the CFA exam.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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