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Never thought we'd see the day when TMZ covers a stock market story on their home page! It happened this morning, with several mainstream publications freaking out over Facebook's (NASDAQ:FB) collapsing stock price.

Not surprisingly, the talking heads are once again making the case for a social media bubble, and shares of Zynga (NASDAQ:ZNGA), LinkedIn (NYSE:LNKD) and Pandora (NYSE:P) are also being dragged down.

But at Contextuall we're not too worried about Facebook's valuation or outlook. We're much more interested in Facebook's user data, and figuring out if there is a correlation between Facebook trends and stock market performance.

Maybe there is a way for you to make money on Facebook without buying its stock...

Our main assumption is that online activity tends to be a leading indicator of real world behavior and trends. Before you buy a car, you use a Google (NASDAQ:GOOG) search to compare prices. If you've just been fired, you tweet about how stupid your boss is, and so on.

In the case of Facebook, our assumption is that there should be some linear correlation between the number of "Likes" and a company's market cap. A multinational mega corporation like Coca-Cola (NYSE:KO) has significantly larger number of Facebook "Likes" than Tom's Taco Stand on the corner of 7th and 2nd avenue, as an example.

In other words, if you can prove that there is indeed a relationship between Facebook "Likes" and market cap, Facebook trends might be useful indicators for investors to evaluate.

To evaluate this hypothesis, we collected data through Facebook's API, and compared "Likes" to market cap. To control for quality, we only focused on companies that have more than 200 "Likes" on the social platform.

We plugged in the most recent data, and found that there is a weak positive linear relationship between "Likes" and market cap (a correlation of 0.2711 to be exact).

We took this a step further, and built a very simple linear regression model (where market cap is expressed in millions, based on a sample of 1216 observations):

MarketCap(All_Sectors) = (0.0033)(Facebook_Likes) + 10192.5399

This model isn't very accurate, but testing shows that the Facebook_Likes variable is indeed statistically significant. (The model has a correlation coefficient 0.241, in case you're wondering).

To further improve the accuracy of the model, we decided to focus on specific sectors. This makes sense, because not all sectors are targeting the mainstream consumers that make up the majority of Facebook's user base.

We could fit the following linear regression models for the various sectors...

Consumer Goods (Correlation coefficient of 0.1596, based on 158 observations): MarketCap(Consumer_Goods) = (0.0022)(Likes) + 8223.798

Services (Correlation coefficient of 0.4061, based on 342 observations): MarketCap(Services) = (0.0028)(Facebook_Likes) + 4710.6395

Technology (Correlation coefficient at 0.4093, based on 281 observations): MarketCap(Technology) = (0.0156)(Facebook_Likes) + 6580.813

We were surprised to find that Industrial Goods stocks showed a strong relationship to Facebook trends. Based on a relatively small sample of 73 observations in the sector, we could fit the following linear regression model (with a correlation coefficient of 0.4632):

MarketCap(Industrial_Goods) = (0.3806)(Facebook_Likes) + 3187.2319

We're not saying that these models are very accurate, nor do we claim that these sample sizes are big enough to make definitive statements. But these equations do prove that there is some sort of statistical relationship between Facebook trends and stock market activity.

At the very least, it might be interesting to combine these data points with conventional financial metrics…

With that in mind, we'll list a few stocks that you can use as a starting point for your own analysis.

All of these stocks have seen a strong increase in the number of Facebook likes between March 30 and May 19---do you think that their valuations will soon reflect these trends? Let us know in the comment section below…

1. LivePerson Inc. (NASDAQ:LPSN): Provides online engagement solutions that facilitate real-time assistance and advice. Market cap at $882.13M. Average per interval growth rate in Likes at 15.26%, with Likes growing from 4,486 to 21,394 between 03/30 and 05/19.

2. Orchard Supply Hardware Stores Corporation (OSH): Market cap at $107.76M. Average per interval growth rate in Likes at 15.01%, with Likes growing from 4,518 to 21,042 between 03/30 and 05/19.

3. Canadian National Railway Company (NYSE:CNI): Engages in the rail and related transportation business in North America. Market cap at $34.71B. Average per interval growth rate in Likes at 13.99%, with Likes growing from 1,033 to 4,360 between 03/30 and 05/19.

4. Dorman Products, Inc. (NASDAQ:DORM): Dorman Products, Inc. supplies original equipment dealer automotive replacement parts, and fasteners and service line products primarily for the automotive aftermarket. Market cap at $901.61M. Average per interval growth rate in Likes at 11.32%, with Likes growing from 1,158 to 3,767 between 03/30 and 05/19.

5. Visa, Inc. (NYSE:V): Operates retail electronic payments network worldwide. Market cap at $91.69B. Average per interval growth rate in Likes at 10.10%, with Likes growing from 165,271 to 476,276 between 03/30 and 05/19.

6. Humana Inc. (NYSE:HUM): Humana Inc. offers various health and supplemental benefit plans in the United States. Market cap at $12.16B. Average per interval growth rate in Likes at 9.67%, with Likes growing from 3,257 to 8,991 between 03/30 and 05/19.

7. Umpqua Holdings Corporation (NASDAQ:UMPQ): Operates as the bank holding company for Umpqua Bank that provides commercial and retail banking services to corporate, institutional, and individual customers primarily in the areas of Oregon, northern California, and Washington. Market cap at $1.4B. Average per interval growth rate in Likes at 7.15%, with Likes growing from 1,990 to 4,253 between 03/30 and 05/19.

8. Dish Network Corp. (NASDAQ:DISH): Provides direct broadcast satellite (NYSEARCA:DBS) subscription television services in the United States. Market cap at $12.81B. Average per interval growth rate in Likes at 7.14%, with Likes growing from 349,074 to 745,670 between 03/30 and 05/19.

9. HDFC Bank Ltd. (NYSE:HDB): Provides banking and financial services to individuals and businesses in India. Market cap at $22.75B. Average per interval growth rate in Likes at 6.43%, with Likes growing from 58,606 to 116,305 between 03/30 and 05/19.

10. Heartland Payment Systems, Inc. (NYSE:HPY): Provides bankcard payment processing services in the United States and Canada. Market cap at $1.1B. Average per interval growth rate in Likes at 6.0%, with Likes growing from 1,364 to 2,588 between 03/30 and 05/19.

11. Delta Apparel Inc. (NYSEMKT:DLA): Operates as an international design, marketing, manufacturing, and sourcing company that features a portfolio of branded and private label activewear apparel and headwear. Market cap at $120.41M. Average per interval growth rate in Likes at 4.59%, with Likes growing from 399 to 654 between 03/30 and 05/19.

12. Herman Miller Inc. (NASDAQ:MLHR): Engages in the research, design, manufacture, and distribution of interior furniture systems, products, and related services worldwide. Market cap at $1.07B. Average per interval growth rate in Likes at 4.24%, with Likes growing from 23,870 to 37,690 between 03/30 and 05/19.

13. Genworth Financial Inc. (NYSE:GNW): Provides insurance, wealth management, investment, and financial solutions in the United States and internationally. Market cap at $2.4B. Average per interval growth rate in Likes at 4.0%, with Likes growing from 3,859 to 5,940 between 03/30 and 05/19.

14. Time Warner Cable Inc. (NYSE:TWC): Operates as a cable operator in the United States. Market cap at $23.15B, most recent closing price at $74.07. Average per interval growth rate in Likes at 3.95%, with Likes growing from 472,516 to 723,662 between 03/30 and 05/19.

15. Mastercard Incorporated (NYSE:MA): Provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers' cheque programs. Market cap at $49.86B. Average per interval growth rate in Likes at 3.79%, with Likes growing from 207,194 to 312,036 between 03/30 and 05/19.

Source: How To Make Money On Facebook Without Buying Its Stock