Question 1: Does a rise in Nokia stock become more likely after a drop?
Answer:
The chances of a 5% rise in Nokia stock over the next month:
= 36% after Nokia stock drops by 5% in a week,
versus,
= 37% after Nokia stock rises by 5% in a week
Question 2: What about the other way around, does a drop in Nokia stock become more likely after a rise?
Answer:
Consider, once again, two cases
Case 1: Nokia stock drops by 5% in a week
Case 2: Nokia stock rises by 5% in a week
The chance of a -5% drop after Case 1 is about 36%, versus about 31% for Case 2. For comparison, for the S&P 500, and for many other stocks, turns out the chances of a 5% drop after Case 1 or Case 2 has occurred, are actually quite similar.
Question 3: Does patience pay?
Answer:
If you buy and hold Nokia stock, 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!
The table below shows the trend for Nokia:
Given a change of Then chances Nokia will change Likelihood
-5% over 5 days +5%over 1 day 8%
-5% over 5 days +5% over 5 days 22%
-5% over 5 days +5% over 10 days 28%
-5% over 5 days +5% over 20 days 36%
-5% over 5 days +5% over 60 days 39%
-5% over 5 days +5% over 250 days 34%
As a comparison, for after a drop of 5% in S&P 500 over a week (5 trading days),while there is an 18% chance the S&P 500 will gain 5% over the
subsequent week, there is more than 50% chance this will happen in 6 months, and 74% chance it’ll gain 5% over a year (about 250 trading days).
Question 4: What about the possibility of a drop after a rise if you wait for a while?
Answer:
The table below shows the trend for Nokia:
Given a change of Then Chances Nokia will change Likelihood =
+5% over 5 days -5% over 1 day 6%
+5%over 5 days -5% over 5 days 17%
+5% over 5 days -5% over 10 days 25%
+5% over 5 days -5% over 20 days 37%
+5% over 5 days -5% over 60 days 41%
+5% over 5 days -5% over 250 days 36%
As a comparison, after the S&P 500 sees a rise of 5% over 5 days, the chances of a 5% drop in S&P 500 are about 15% over the subsequent month of waiting (21 trading days). However, this chance drops slightly to about 13% when the waiting period is a quarter (63 trading days).
Question 5: How does Nokia stock compare with Ericsson?
Case 1: Nokia stock moves -5% over 21 days, the chance of a -5% move in 21 days = 35%; Ericsson same case, 22%
Case 2: Nokia stock moves -5% over 21 days, the chance of a +10 move in 2 days = 20%; Ericsson same case, 14%
Case 3: Nokia stock moves -5% over 21 days , the chance of a +5, move in 21 days = 34%; Ericsson same case, 31%