Machine Learning Answers: If BlackBerry Stock Drops 10% A Week, What’s The Chance It’ll Recoup Its Losses In A Month?

by Trefis Team
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The markets have largely remained divided on BlackBerry stock. While the company’s revenues have declined sharply over the last few years, driven by its exit from the smartphone business and the decline of its lucrative BlackBerry services business, it has been making multiple bets on high-growth areas ranging from cybersecurity to automotive software, although they have yet to pay off. This uncertainty relating to BlackBerry’s future has caused the stock to remain very volatile.

Considering the significant price movements, we began with a simple question that investors could be asking about BlackBerry’s stock: given a certain drop or rise, say a 10% drop in a week, what should we expect for the next week? Is it very likely that the stock will recover the next week? What about the next month or a quarter? You can test a variety of scenarios on the Trefis Machine Learning Engine to calculate if the BlackBerry stock dropped, what’s the chance it’ll rise.

For example, if BlackBerry (BB) Stock drops 10% or more in a week (5 trading days), there is a 27% chance it’ll recover 10% or more, over the next month (about 20 trading days). On the other hand, after a 5% drop over a week (5 trading days), the Trefis machine learning engine says chances of an additional 5% drop over the next month, are about 36%. This is quite significant, and helpful to know for someone trying to recover from a loss. Knowing what to expect for almost any scenario is powerful. It can help you avoid rash moves.

 

Below, we also discuss a few scenarios and answer common investor questions:

Question 1: Does a rise in BlackBerry stock become more likely after a drop?

Answer:

The chances of a 5% rise in BlackBerry stock over the next month:

= 37%% after BlackBerry stock drops by 5% in a week

versus,

= 41% after BlackBerry stock rises by 5% in a week

 

Question 2: What about the other way around, does a drop in BlackBerry stock become more likely after a rise?

Answer:

Consider two cases

Case 1: BlackBerry stock drops by 5% in a week

Case 2: BlackBerry stock rises by 5% in a week

Turns out the chances of a 5% drop after Case 1 or Case 2 has occurred, is actually quite similar, both pretty close to 35%.

 

Question 3: Does patience pay?

Answer:

According to data and Trefis machine learning engine’s calculations, only to an extent.

Given a drop of 5% in BlackBerry stock over a week (5 trading days), while there is only about 24% chance the BlackBerry stock will gain 5% over the subsequent week, there is a 45% chance this will happen in 6 months, and 41% chance it’ll gain 5% over a year (about 250 trading days).

 

The table below shows the trend:

Question 4: What about the possibility of a drop after a rise if you wait for a while?

Answer:

After seeing a rise of 5% over 5 days, the chances of a 5% drop in BlackBerry stock are about 44% over the subsequent quarter of waiting (60 trading days). This chance increases to about 53% when the waiting period is a year (250 trading days).

The table below shows the trend:

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