What it takes to survive the selloff

With markets dropping dramatically over the past week, hardly any large stocks have been immune from the selling. But the stocks that have done the best in these turbulent markets have something in common: For one reason or another, their performance has had nothing to do with the markets.

In the entire S&P 500,only five stocks managed to log gains over the past five sessions, as of early trading Wednesday morning.

Two of those companies, Cameron International and AGL Resources, rose on news that they are set to be acquired—Cameron by Schlumberger, and AGL by Southern Co. Another, Hospira, jumped after news that Pfizer's takeover offer was approved by regulators. One more, Best Buy, surged off of a big earnings and revenue beat.

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The situation for the fifth rising stock, Keurig Green Mountain, is a bit more complex. The shares do not appear to be responding to any given news event; rather, this battered stock simply appears to trade idiosyncratically.

One analyst told CNBC that investors are merely betting that Keurig, which fell powerfully after reporting earnings in early August, has become oversold. Another made the point that shares of companies that have already gotten hit hard in 2015 have fared better in the selloff.

In fact, there is a popular calculation for how closely a given stock moves in lockstep with the S&P 500, called beta. Keurig's beta over the past five years is 0.49, according to FactSet, which makes it one of the less market-correlated S&P names.

Unsurprisingly, the higher a stock's beta, the worse it has done in the recent decline. A glance at the correlation between beta and price change over the past five trading days is instructive: On a range between 1 (indicating perfect correlation) and -1 (exact negative correlation) that figure stands at -0.26.

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Over the past week, the 10 highest-beta stocks have lost an average of 12 percent, while the 10 lowest-beta stocks have dropped 8.6 percent on average. A similar relationship can be seen among the quintiles of the S&P 500, with each successively lower-beta set of 100 stocks seeing smaller losses.

While few stocks have been immune for the selling, then, investors should at least know that they have the analytical tools necessary to predict which stocks will suffer less downside in a further slide for the market.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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