Alcoa stock (NYSE: AA) has seen a large rise of 80% in the last six months and currently trades at $41 per share. The sharp rally was driven by an increase in global aluminum prices. The gradual lifting of lockdowns, widening coverage of vaccines against Covid-19, and stimulus measures have led to optimism in the markets of faster economic recovery. Additionally, the near bipartisan passage of the U.S. infrastructure bill in the Senate has led to expectations of higher demand for steel, aluminum, copper, etc. which has driven the rally in global prices of commodities. Aluminum price per ton has increased almost 20% in the last six months from $2,130 to $2,555, and over the last one year the price of aluminum is up more than 40%. This has also helped Alcoa record its highest profitability since the time the old Alcoa was split up into two entities – Arconic and present-day Alcoa in 2016, with a net income margin of 11% and EPS of $1.63 in Q2 2021. 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 6.5% in the next one-month (21 trading days) period after experiencing an 80% rise over the previous six-month (126 trading days) period. The stock has a 61.5% probability of giving a positive return in the next month. 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 AA stock chances of 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:
- With Aluminum Prices On The Decline, What Next For Alcoa?
- Will Alcoa’s Top Line Remain Strong In 2022?
- Why Is Alcoa Stock Attracting Investor Optimism?
- What’s Behind The Recent Surge In Alcoa Stock?
- Alcoa Stock Above $50 – What’s Behind This Surge?
- Aluminum Price Nearing $3,000 – What’s The Impact On Alcoa Stock?
IF Alcoa stock moved by -5% over 5 trading days, THEN over the next 21 trading days, Alcoa stock moves an average of almost 3 percent, with a more than 49% probability of a positive return.
Some Fun Scenarios, FAQs & Making Sense of Alcoa Stock Movements:
Question 1: Is the average return for Alcoa stock higher after a drop?
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 better after Case 2, with an average return of 3.1% 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 average return of 5.7% 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?
If you buy and hold Alcoa 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 AA stock, the returns over the next N days after a -5% change over the last five 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?
The average return after a rise is understandably lower than after a fall 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 – 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 five 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 that’s beaten the market since 2016.