Cabot Corp (NYSE:CBT) was acknowledged as having a bigger market capitalization than the smaller end of the S&P 500 (INDEXSP:.INX) for instance Advanced Micro Devices, Inc. (NYSE:AMD), in the most recent look at stocks structured by biggest market capitalization. Market capitalization plays a key role for the investors to help them know about various reasons and the most fundamental reason is that it provides a true evaluation of the value credited by the stock market to the stock of the company.

Majority of the beginner investors believe that a company with a high trading price like $20 is worth twice as much in comparison with a company that has a trading price of $10, without taking into consideration the number of shares of each company. The comparison of market capitalization helps the investors in comparing the value of two company’s stocks.  In the case of above two companies, the market capitalization of Cabot Corp is currently $2.64B whereas that of Advanced Micro Devices, Inc. is $2.58B. The closing price of CBT is up nearly 0.3 percent whereas AMD is down nearly 1.9 percent on Monday trading.

Another reason for which market capitalization is vital is the position at which it places the company in terms of its size category in comparison with its peers. This can have a straight influence on which indices will take account of the stock, and which Mutual Funds and Exchange Traded Funds are willing to possess the stock. For example, a mutual fund that is solely paying attention on Large Capitalization stocks may only be concerned in those companies sized $10 billion or bigger.

Another helpful example is the Mid Cap index of  S&P which basically takes the S&P 500 index and classifies the biggest 100 companies so as to solely emphasize on the “up-and-comers” of 400 smaller companies. Exchange Traded Funds use to sell the companies that drop their status as a company of S&P 500 and buy the companies when they are included in the index.  Advanced Micro Devices, Inc. (NYSE:AMD) shares fell -1.92% in last session to close at $3.58. Cabot Corp (NYSE:CBT) shares moved up 0.27% in last session to close at $41.28.