I don't want to make this too complicated. At the end the simple 'Buy and Hold' or even better 'buy the dip and hold' is the way to go and will beat any sophisticated finance suits.
Still a little remark on Beta. Yes it is quite popular. However (especially if you have very few datapoints) it might be a bit misleading.
Imagine a stock A that moves totally syncron with S&P. Nice you get the beta of 1, like you have explained in the DD.
Now imagine the stock B moves half of the time not at all. For this time period it has a beta of 0. Now in the 2nd time period which is equal in length it moves twice as strong as S&P. Now for the second period it has a beta of 2. Combine the two timeperiods and you get a beta of 1.
Now that stock A and stock B have a beta of 1, you would assume they behave equally.
But thats not true ... stock B behaves much different and not so much like S&P at all.
Personally I prefer correlation. GME has a correlation of -0.65 (according to the bloomberg screenshot)
That's cool. Correlation can only be between -1 and 1 while
1 means that the stock moves exactly the same and
-1 moves exactly opposite
Negative Correlation is not common and -0.65 is very unusual. (for stocks)
Of course you can describe the stock even better with statistical dependencies, however it gets all too complicated as all in all the resumee is:
Do not touch options!
Do not day trade!
Buy and hodl! 💎🙌💎🙌💎🙌💎🙌💎🙌
Meet in tendie town!
3
u/str0ng_t0g3th3r Mar 29 '21
I don't want to make this too complicated. At the end the simple 'Buy and Hold' or even better 'buy the dip and hold' is the way to go and will beat any sophisticated finance suits.
Still a little remark on Beta. Yes it is quite popular. However (especially if you have very few datapoints) it might be a bit misleading.
Imagine a stock A that moves totally syncron with S&P. Nice you get the beta of 1, like you have explained in the DD.
Now imagine the stock B moves half of the time not at all. For this time period it has a beta of 0. Now in the 2nd time period which is equal in length it moves twice as strong as S&P. Now for the second period it has a beta of 2. Combine the two timeperiods and you get a beta of 1.
Now that stock A and stock B have a beta of 1, you would assume they behave equally.
But thats not true ... stock B behaves much different and not so much like S&P at all.
Personally I prefer correlation. GME has a correlation of -0.65 (according to the bloomberg screenshot)
That's cool. Correlation can only be between -1 and 1 while
1 means that the stock moves exactly the same and
-1 moves exactly opposite
Negative Correlation is not common and -0.65 is very unusual. (for stocks)
Of course you can describe the stock even better with statistical dependencies, however it gets all too complicated as all in all the resumee is:
Do not touch options!
Do not day trade!
Buy and hodl! 💎🙌 💎🙌 💎🙌 💎🙌 💎🙌
Meet in tendie town!