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

by Trefis Team
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Trefis
FCX
Freeport-McMoRan Inc.
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We found that if Freeport-McMoRan (NYSE: FCX) Stock drops 10% or more in a week (5 trading days), there is a solid 32% chance it’ll recover 10% or more, over the next month (about 20 trading days).

While Freeport-McMoRan stock has seen significant volatility this year, on account of trade worries between the U.S. and China and mixed earnings reports, there are some positives as well, including the company’s ongoing expansion of its Grasberg copper and gold mine in Indonesia.

Considering the recent price swings, we started with a simple question that investors could be asking about Freeport 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 Freeport stock dropped, what’s the chance it’ll rise.

For example, 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 30%. 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. Given the recent volatility in the market, the mix of macroeconomic events (including the trade war with China and interest rate easing by the U.S. Fed), we think investors can prepare better.

 

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

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

Answer:

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

= 39.5%% after FCX stock drops by 5% in a week

versus,

= 39.8% after FCX stock rises by 5% in a week

 

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

Answer:

Consider two cases

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

Case 2: FCX 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 30%.

 

Question 3: Does patience pay?

Answer:

According to data and Trefis machine learning engine’s calculations, absolutely!

Given a drop of 5% in FCX stock over a week (5 trading days), while there is only about 26% chance the FCX stock will gain 5% over the subsequent week,

there is more than 53% chance this will happen in 6 months, and 60% 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 FCX stock are about 32% over the subsequent quarter of waiting (60 trading days). However, this chance drops slightly to about 29% when the waiting period is a year (250 trading days).

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