Contributing Factors in Forecasting: Stocks vs. Stock Market and Sectors

Each company belongs to a particular industry, sector, national stock market, as well as, global stock market. If system conditions change, company and its stocks respond to this changes. Indeed, a general stock market exerts a significant influence on the behavior of an individual company stocks. That is why experienced investors always carefully watch the stock market, sectors, and industries conditions.

On the other hand, a company is a part of subsystems and global system. It means each company performance is a contributing factor in a whole system performance. So that we could analyze a single company and try to predict the behavior of the stock market. However, it is only partially possible. As example, the recent financial crisis caused by a system failure showed that system itself may have a significantly bigger risk-factor.

Since all structure and all levels of sub-structures depend mutually, it would be unwise to ignore either predictions of big, medium, or small parts or a whole system. Evidently it is possible to build a more accurate forecast by combining predictions for system, sub-systems, and elements of sub-system.

As example, let's consider a three-month forecast for stock market (515 stocks from different sectors):




stocks from different sectors:




and individual company stocks from a leading sector:




In conclusion, we could assume that there is a certain probability that the stock market will have a correction (downtrend around 8-12%) after May 6.

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The charts have been calculated and plotted by Investment Analyzer Inv-An-4.

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Nothing in this piece or in this blog should be construed as investment advice in any way. Always do your own research or/and consult a qualified investment advisor. It is wise to analyze data from multiple sources and draw your own conclusions based on the soundest principles. Be aware of the risks involved in stock investments.

© Alex Shmatov. Published with permission of the copyright owner. Further reproduction strictly prohibited without permission.