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

by Trefis Team
-3.20%
Downside
37.31
Market
36.12
Trefis
TWTR
Twitter
Rate   |   votes   |   Share

Twitter (NYSE:TWTR) stock has seen significant volatility over the last few years. While the stock is benefiting from an expanding international user base and improving monetization, slowing growth rates and concerns about its valuation have hurt the stock. Considering the recent price movements, we began with a simple question that investors could be asking about Twitter’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 Twitter 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 31%. 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 Twitter stock become more likely after a drop?

Answer:

Not really.

Specifically, chances of a 5% rise in Twitter stock over the next month:

= 34% after Twitter stock drops by 5% in a week.

versus,

= 36.5% after Twitter stock rises by 5% in a week.

 

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

Answer:

Yes, Slightly more likely. Specifically, chances of a 5% decline in Twitter stock over the next month:

= 30.7% after Twitter stock drops by 5% in a week

versus,

= 34.5% after Twitter stock rises by 5% in a week

 

Question 3: Does patience pay?

Answer:

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

Given a drop of 5% in Twitter stock over a week (5 trading days), while there is only about 23% chance the Twitter stock will gain 5% over the subsequent week, there is more than a 40% chance this will happen in 3 months.

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 Twitter stock are about 45% over the subsequent quarter of waiting (60 trading days). However, this chance drops slightly to about 42.5% when the waiting period is a year (250 trading days).

The table below shows the trend:

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

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.

Rate   |   votes   |   Share

Comments

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