May 1, 2024

Amazon's Industry Membership Evolution

Leveraging AI clustering techniques to better understand how companies can be grouped, compared to traditional static industry groupings

Amazon's Industry Membership Evolution

In investment management, understanding a company's industry and sector is crucial for setting realistic performance benchmarks, assessing risks, and conducting comparative analyses.

Each industry and sector faces unique economic forces, regulatory environments, and strategic challenges, affecting companies' competitive positioning and sensitivity to macroeconomic changes.

The exact industry and sector a company falls within has typically been determined through frameworks like GICS, which are hierarchically defined and create binned, static, classifications grouping together companies (companies fall within a single industry/sector).

While this framework creates a consistent and relatively easy way to categorize companies, it is likely missing part of the picture as some companies may be misclassified, fit within multiple sectors & industries, or change over time.

In this article, we explore how clustering analysis can be used to:

  1. identify the group of companies most closely related to an individual company (for example Amazon),
  2. and how clustered companies can be grouped in a strategy.

Read the full article on the AlphaLayer Substack.

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