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The stock price of Kansas City Southern (NYSE: KSU) reached an all-time high of $313 in May this year before a larger sell-off in the railroad companies, especially on July 8, 2021, drove the stock price down nearly 15% to its current level of around $267. KSU stock has declined 6.3% since last Wednesday, primarily due to two factors: 1. A broader decline in the railroad stocks after the reports of the Biden administration working on an executive order to address the issue of inflated and anti-competitive pricing for railroad and ocean shipping companies, and 2. concerns on how will that new order impact the company’s merger with Canadian National. But will KSU stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?
According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for KSU stock average 3% in the next one-month (twenty-one trading days) period after experiencing a 6% drop over the previous week (five trading days). However, for KSU stock the movement will largely depend on how the new executive order, when released, impacts the company.
But how would these numbers change if you are interested in holding KSU stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Kansas City Southern stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!
MACHINE LEARNING ENGINE – try it yourself:
IF KSU stock moved by -5% over five trading days, THEN over the next twenty-one trading days KSU stock moves an average of 4.4%, with a 72% probability of a positive return over this period.
Some Fun Scenarios, FAQs & Making Sense of Kansas City Southern Stock Movements:
Question 1: Is the average return for Kansas City Southern stock higher after a drop?
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Answer: Consider two situations,
Case 1: Kansas City Southern stock drops by -5% or more in a week
Case 2: Kansas City Southern stock rises by 5% or more in a week
Is the average return for Kansas City Southern stock higher over the subsequent month after Case 1 or Case 2?
KSU stock fares better after Case 1, with an average return of 4.4% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.2% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Kansas City Southern stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
Answer: If you buy and hold Kansas City Southern 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!
For KSU stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
You can try the engine to see what this table looks like for Kansas City Southern after a larger loss over the last week, month, or quarter.
Question 3: What about the average return after a rise if you wait for a while?
Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
It’s pretty powerful to test the trend for yourself for Kansas City Southern stock by changing the inputs in the charts above.
While KSU stock may rebound, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Waste Management vs. Canadian Pacific.