Theoretical question on Probability

Discussion in 'Risk Management' started by themickey, Jul 11, 2025 at 6:44 AM.

  1. themickey

    themickey

    Here's a question...

    There are 3 similar stocks.

    Stock A has trended up 300% in this past 12 months on low volatility.
    Stock B has trended up 200% in this past 12 months on low volatility.
    Stock C has trended up 100% in this past 12 months on low volatility.

    Also
    Stock B has risen 60% in the past 3 months and continues to trend.
    Stock C has risen 40% in the past 3 months and continues to trend.
    Stock A has risen 20% in the past 3 months and continues to trend.

    Also
    Stock C has risen 20% in the past 1 month and continues to trend.
    Stock A has risen 15% in the past 1 month and continues to trend.
    Stock B has risen 7% in the past 1 month and continues to trend.

    Which one has the highest probability of the greatest increase next 3 months all going well.
     
  2. Sekiyo

    Sekiyo

    Past performance isn't indicative of future performance.

    Probability is 1/3. Adjust for volatility.
    More exposure to lower volatility stocks.

    A's volatility > B's volatility > C's volatility
    Whatever "low volatility" means.

    Momentum traders will pick A.
    Best absolute & relative performance.
    "Smart" traders will pick the best Sharpe.
    Abracadabra will make money whatever happens.
     
    Last edited: Jul 11, 2025 at 7:07 AM
    Drawdown Addict likes this.
  3. tomkat22

    tomkat22

    Personally I'd pick C,it seems to have the most RECENT momentum. Traders have sort of a "What have you done for me lately" mentality.
     
  4. themickey

    themickey

    Past performance is indicative of future performance frequently, until the trend changes.
     
  5. themickey

    themickey

    A volatile or non volatile stock usually will remain that way.
     
  6. themickey

    themickey

    The reason for the query, is long term historical performance more important than short term?
     
  7. An object in motion tends to stay in motion until an equal or opposing force.
     
  8. themickey

    themickey

    Is a stock price an object?
     
  9. Fundamentalists start the Trend, Momentum Traders tend to continue it. Fundamentalists then kill it?

    (That's all I got, sorry, it's late and I've spent the Day arguing with WXY.)
     
  10. themickey

    themickey

    There's no basis for that theory.
    Anybody can hitch onto a trend anytime for any number of reasons.
    A trend is usually a straightish type line. Who makes it straight? Technicians? Fundamentalists? Algos?
    Is an algo a technician or fundamentalist?