Why another industry index
Cybersecurity market indexes already exist. Most are built to support ETFs, benchmark funds, or predefined classification frameworks. That shapes what they optimize for: liquidity constraints, market-cap weighting, turnover rules, and product eligibility.
I’ve been tracking the cybersecurity industry closely for several years and I use some of those indexes myself. They are useful. But over time, I felt the need for something simpler. An instrument that focuses on how the cybersecurity market behaves as a system.
That’s why I created the Signals Cybersecurity Market Index (SCMI):
Most existing market indexes are designed to answer questions like:
- How does a tradable basket of cybersecurity stocks perform?
- How can this exposure be packaged into a financial product?
SCMI starts from a different question: How is the cybersecurity industry being valued, relative to the rest of the market, over time?
That difference matters.
Cap-weighted market indexes tend to collapse sector behavior into the performance of a few large names. Product-driven constraints often lag changes in market structure or business models. Over time, the signal becomes harder to read.
Signals Cybersecurity Market Index is deliberately simple, equal-weighted, and opinionated in its construction. It exists to track direction, sensitivity, and relative strength.
SCMI doesn’t serve as an investable product in itself but it supports better investment decisions.
What SCMI is designed to show
SCMI is a market signal that helps answer questions like:
- Is cybersecurity leading or lagging the broader market?
- When risk appetite changes, does security move earlier or later?
- Are security stocks behaving as a defensive asset, a growth asset, or something in between?
It is useful for:
- investors looking at sector-level exposure,
- executives trying to understand how the market values cybersecurity at a given moment,
- anyone trying to separate sector dynamics from general market noise.
What Signals Cybersecurity Market Index does not do:
- It does not forecast stock performance.
- It does not replace fundamental analysis that each investor must do.
- It does not represent investment advice.
Methodology
SCMI is intentionally simple and the goal is representation, not completeness.
Constituents
The industry index includes publicly listed companies whose primary business is cybersecurity.
This covers areas such as:
- endpoint and network security
- cloud and identity security
- application and infrastructure protection
- security platforms and services
Companies where cybersecurity is a secondary or marginal activity are excluded. Large platform players like Google or Microsoft are also excluded.
Weighting
SCMI uses an equal-weighted approach across constituents.
This avoids the index being distorted by a small number of mega-cap names and better reflects how the average cybersecurity company is performing.
Equal weight is not a statement about investment preference.
Base value
SCMI is normalized to a base value of 1000 at inception to allow intuitive comparison over time.
The absolute number is not important. The direction and relative movement are.
Benchmark comparison
To put SCMI into context, it is compared against the S&P 500 Equal Weight index (SPXEW).
SPXEW is used instead of the traditional S&P 500 because:
- it reduces the impact of mega-cap concentration,
- it better represents the performance of the average public company,
- relative movements are easier to interpret.
This makes the comparison more meaningful than using a cap-weighted benchmark dominated by a handful of stocks.
Note: SPXEW values are normalized for easier comparison with SCMI.
Current constituents
The current version of Signals Cybersecurity Market Index includes the following companies:
| Symbol | Company | Type |
|---|---|---|
| PANW | Palo Alto Networks | Enterprise |
| FTNT | Fortinet | Enterprise |
| CHKP | Check Point Software | Enterprise |
| CRWD | CrowdStrike | Enterprise |
| ZS | Zscaler | Enterprise |
| OKTA | Okta | Enterprise |
| CYBR | CyberArk | Enterprise |
| S | SentinelOne | Enterprise |
| TENB | Tenable | Enterprise |
| QLYS | Qualys | Enterprise |
| RPD | Rapid7 | Enterprise |
| VRNS | Varonis Systems | Enterprise |
| NET | Cloudflare | Infrastructure |
| AKAM | Akamai Technologies | Infrastructure |
| FFIV | F5 | Infrastructure |
| GEN | Gen Digital | Consumer |
| RDWR | Radware | Enterprise |
| VRSN | VeriSign | Infrastructure |
This list reflects the index at its current state. Changes are expected over time as the market evolves.
How to use Signals Cybersecurity Market Index
SCMI works best as:
- a directional indicator for the cybersecurity sector,
- a context layer alongside earnings, incidents, and regulation,
- a reference point for discussion and analysis.
It is not a trading system and it does not represent investment advice. It is a way to read the market’s posture toward cybersecurity.
