Question 1: Is the expected return for Honda Motor stock higher after a drop?
Consider two situations,
Case 1: Honda Motor stock drops by -5% or more in a week
Case 2: Honda Motor stock rises by 5% or more in a week
Is the expected return for Honda Motor stock higher over the subsequent month after Case 1 or Case 2?
HMC stock fares better after Case 1, with an expected return of 2.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 0% for Case 2.
In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.
Try the Trefis machine learning engine above to see for yourself how Honda Motor stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Honda Motor stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine's calculations, patience absolutely pays for most stocks!
For HMC stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Next N DaysHMC Expected ReturnS&P 500 Expected Return1 day0.3%0.5%5 days0.8%1.1%10 days0.7%0.9%21 days2.2%3.1%63 days5.6%5.2%126 days5.5%7.4%252 days9.7%15.6%
You can try the engine to see what this table looks like for Honda Motor after a larger loss over the last week, month, or quarter.
Question 3: What about the expected return after a rise if you wait for a while?
The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
HMC's returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Next N DaysHMC Expected ReturnS&P 500 Expected Return1 day0.1%-0.3%5 days0%-0.3%10 days-0.3%0.1%21 days0%0.5%63 days2%3.0%126 days1%6.6%252 days4.6%11.7%
It's pretty powerful to test the trend for yourself for Honda Motor stock by changing the inputs in the charts above.