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

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 company’s 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 Sprint stock: 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, 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 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 Reserve’s 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 the S&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 engine’s 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 it’ll 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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