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The stock market isn’t always highly volatile—featuring dramatic price swings, in the same vein as the cryptocurrency market—but prices do fluctuate every day. When stock price fluctuations occur, there are often several factors involved.
The first is the overall economic and political climate, both of which have a direct effect on a company’s performance. The second is the performance of an entire sector. If the technology industry is booming, then the price of tech stocks will move to reflect that. And the third is the performance of the specific, individual company itself.
That last factor may be the most important as far as investors are concerned. While the economic, political, and industrial climate might have positive or negative implications on stock prices, these are all broader issues that are unavoidable in any market.
A company’s performance, however, is crucial in deciding whether a stock will perform well. Moreover, if the future of a company is in doubt, then an investor’s portfolio will be in doubt, too. So what exactly do stock price fluctuations teach us about the future of a company?
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Evaluating Stock Price Performance
Firstly, it’s exceedingly difficult to decipher how or why a stock is performing the way it is, or what that means for your own portfolio. If you look at the top-ranked stocks for late Q4 2023, two of the top stocks are NVDA and PYPL. But one month ago, PYPL’s stock declined -28.32% year-to-date, and -12.68% since October 1.
Similarly, while NVDA achieved a return of 181.75%, it experienced a -5.37% loss at the beginning of Q4. It would be difficult to argue that either of these price fluctuations, although moving in a downward trajectory, give us a negative outlook on the future of these companies. Nor is it possible to ascertain what the future of these companies looks like from the price fluctuations alone.
Caring About Stock Prices
That’s not to say the stock market doesn’t give us clues. Generally speaking, the higher a stock price is, the better a company’s prospects become. So if a company’s stock is moving up, then it would suggest their future is looking more positive. But how do you know if the stock is really going up, or whether it is fluctuating due to higher-than-normal volatility?
In 2023, there are many ways to find out. For example, we can turn to new technologies such as AI that provide clearer analysis. While the S&P 500 has been the benchmark for investors, AI is now being used to collect a wider range of data, analyzing it to pinpoint key factors in their movement, and then offering insights to investors to help them manage their portfolios.
Using this technology can help investors to further understand specific fluctuations, and what they might say about how a company is performing. They are more direct, focused, and—most importantly—reliable. They can also be analyzed and offered in real-time. For example, AI can help investors track a stock’s performance and understand any given movement more deeply.
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Using Tech Tools to Analyze a Company’s Prospects
So, yes, stock price fluctuations can teach us whether a company’s future is bright or murky, but only with the appropriate tech helping us to get to the root of those movements. In short, tech tools can teach us what stock price fluctuations could mean for the future of our portfolios.
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