After 70% Rise, Having Alcoa In Your Portfolio May Not Make Sense

by Trefis Team
-36.52%
Downside
21.83
Market
13.86
Trefis
AA
Alcoa
Rate   |   votes   |   Share

Alcoa stock (NYSE: AA) increased an impressive 69% in the last six months and currently trades around $13 per share. The rise was mainly due to recovery in the aluminum prices as global lockdowns were gradually being lifted. But will Alcoa’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s historical stock price data, returns for Alcoa stock average close to -8.6% in the next one-month (21 trading days) period after experiencing a 69% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to underperform the S&P500 over the next month, with an expected return which would be 9.6% lower compared to the S&P500.

But how would these numbers change if you are interested in holding Alcoa stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Alcoa stock chances for a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF Alcoa stock moved by -5% over 5 trading days, THEN over the next 21 trading days, Alcoa stock moves an average of 1.2 percent, which implies a return which is 1 percent lower than that of the S&P500.

More importantly, there is a 46% probability of a positive return over the next 21 trading days and 39% probability of a positive excess return after a -5% change over 5 trading days.

 

Some Fun Scenarios, FAQs & Making Sense of Alcoa Stock Movements:

Question 1: Is the average return for Alcoa stock higher after a drop?

Answer:

Consider two situations,

Case 1: Alcoa stock drops by -5% or more in a week

Case 2: Alcoa stock rises by 5% or more in a week

Is the average return for Alcoa stock higher over the subsequent month after Case 1 or Case 2?

AA stock fares almost similar in both cases, with an average return of 1.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), similar to an average return of 1.2% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Alcoa stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Alcoa stock, the expectation is over time the near term fluctuations will cancel out, and the positive trend over the next month and next quarter 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 AA 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:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

If a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although AA stock appears to be an exception to this general observation.

AA’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:

It’s pretty powerful to test the trend for yourself for Alcoa stock by changing the inputs in the charts above.

What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

 

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!