Machine Learning Answers: Sprint Stock Is Down 15% Over The Last Quarter, What Are The Chances It’ll Rebound? – Trefis

Sprint (NYSE:S) stock has seen significant volatility over recent months declining by about 15% over the last quarter and by close to 25% over the last six months on account of the companys underperforming postpaid wireless business and concerns on whether its proposed merger with larger rival T-Mobile will come to fruition.

We started with a simple question that investors could be asking about the Sprintstock: given a certain drop or rise, say a 5% drop in a week, what should we expect for the next week? Is it very likely that Sprint will recover the next week? What about the next month or a quarter?

In fact, we found that if the Sprint drops 15% in a quarter (63 trading days), there is a ~23% chance that it will rise by 10% over the subsequent month (21 trading days).Want to try other combinations? You can test a variety of scenarios on the Trefis Machine Learning Engine to calculate if Sprint stock dropped, whats the chance itll 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 say the next month are about 34%. 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 owing to a mix of macroeconomic events like the trade war with China and the US Federal Reserves moves, we think investors can prepare better.

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

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

Answer:

Consider two situations,

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

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

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

The answer is not really. The chance of a 5% rise over a month (21 trading days) is roughly that same at 34% for both cases.

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

Answer:

Consider, once again, two cases:

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

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

The probability of a 5% drop after Case 1 or Case 2 is actually quite similar at 34% and 33%, respectively. The probability is also similar for theS&P 500, and for many other stocks.

Question 3: Does patience pay?

Answer:

If you buy and hold Sprint 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 engines calculations, patience absolutely pays for most stocks!

After a drop of 5% in Sprint stock over a week (5 trading days), while there is only about 23% chance the stock will gain 5% over the subsequent week, there is more than 39% chance this will happen in 6 months, and 45% chance itll gain 5% over a year (about 252 trading days).

The table below shows the trend for Sprint Stock:

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 Sprint stock are about 42% over the subsequent quarter of waiting (63 trading days). This chance increases slightly to about 45% when the waiting period is a year (252 trading days).

The table below shows the trend for Sprint Stock:

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Machine Learning Answers: Sprint Stock Is Down 15% Over The Last Quarter, What Are The Chances It'll Rebound? - Trefis