Nokia Stock Has Tanked 30% Over The Last Quarter, Is it Time To Buy? Ask The AI Engine

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Question: With Nokia stock down by about 30% in the last quarter on account of an unfavorable outlook for 2020 and concerns regarding the company’s 5G roadmap, many Trefis users asked: how likely is it that the stock will recover over the next week, next month or over the next quarter?

Answer: According to the Trefis Machine Learning Engine, there is a 36% chance that Nokia (NOK) stock will rise by 10% one month (21 trading days) after experiencing a 30% drop over a quarter (63 trading days). However, this probability improves to about 45% if we wait for another quarter.

What about the possibility of an additional 10% drop in Nokia’s stock after the recent rout? You can find the answer to this question and for many other combinations on the Trefis AI Engine for Nokia Stock: Chances for Rebound after a Fall, or, the chance of a Dip after a Rise.

 

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

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

Answer:

Consider two situations,

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

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

Is the chance of say a 5% rise in Nokia stock over the subsequent month after Case 1 or Case 2 occurs much higher for one versus the other?

For Nokia, the answer is not really. The chances of a 5% rise over the next month (21 trading days) is about 36% for Case 1, where the Nokia has just suffered a big loss, versus, about 37% for Case 2.

 

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, 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!

The table below shows the trend for Nokia:

As a comparison, for the S&P 500 a drop of 5% over a week (5 trading days) there is an 18% chance the S&P 500 will gain 5% over the subsequent week, while 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:

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 movement 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%

It would appear that Ericsson’s stock movements are generally less pronounced than that for Nokia.

 

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