Question 1: When is it a better time to buy Carnival stock - after a drop or after a rise?Answer:Consider two situations,Case 1: Carnival stock drops by -5% or more in a monthCase 2: Carnival stock rises by 5% or more in a month
CCL stock fares better after Case 1, with a 68.1% chance of a rise over the next month (21 trading days) under Case 1 (where the stock has suffered a 5% loss over the previous month), versus, a 43.5% chance of a rise for Case 2. This would suggest that it is better to buy CCL stock after a recent drop
Try the Trefis machine learning engine to see for yourself how Carnival stock is likely to behave after any specific gain or loss over a period.
Question 2: Does Carnival stock have a higher chance of a rise after a steeper drop?Answer:Trefis machine learning engine's calculations show that for most stocks, the chance of a rise reduces as the drop gets steeper. However, after unusually high declines of -10% or more, there is usually an improvement in the chance of a rise. This makes sense intuitively, as markets often overreact to bad news around a company
For CCL stock, the probability of positive returns over the next month (21 trading days) after a drop of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% DropNext 21 daysPositive Return ProbabilityCCL S&P 500-1%61.0%71.1%-3%64.7%73.0%-5%68.1%72.7%-7.5%66.6%78.3%-10%66.5%78.4%
Question 3: What about Carnival stock's chances of a rise after a recent rally?
Answer:CCL's probability of positive returns over the next month (21 trading days) after a gain of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% RiseNext 21 daysPositive Return ProbabilityCCL S&P 500+1%50.8%67.8%+3%48.3%68.5%+5%43.5%67.0%+7.5%38.8%68.4%+10%37.9%74.2%