Machine Learning stock prediction: HD Stock Prediction

The categorization of high dimensional data present a fascinating challenge to machine learning models as frequent number of highly correlated dimensions or attributes can affect the accuracy of classification model. In this paper, the problem of high dimensionality of stock exchange is investigated to predict the market trends by applying the principal component analysis (PCA) with linear regression. PCA can help to improve the predictive performance of machine learning methods while reducing the redundancy among the data. We evaluate Home Depot prediction models with Modular Neural Network (Market Volatility Analysis) and Logistic Regression1,2,3,4 and conclude that the HD stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell HD stock.


Keywords: HD, Home Depot, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. What is the best way to predict stock prices?
  2. How do predictive algorithms actually work?
  3. Which neural network is best for prediction?

HD Target Price Prediction Modeling Methodology

Predictions on stock market prices are a great challenge due to the fact that it is an immensely complex, chaotic and dynamic environment. There are many studies from various areas aiming to take on that challenge and Machine Learning approaches have been the focus of many of them. There are many examples of Machine Learning algorithms been able to reach satisfactory results when doing that type of prediction. This article studies the usage of LSTM networks on that scenario, to predict future trends of stock prices based on the price history, alongside with technical analysis indicators. We consider Home Depot Stock Decision Process with Logistic Regression where A is the set of discrete actions of HD stock holders, F is the set of discrete states, P : S × F × S → R is the transition probability distribution, R : S × F → R is the reaction function, and γ ∈ [0, 1] is a move factor for expectation.1,2,3,4


F(Logistic Regression)5,6,7= p a 1 p a 2 p 1 n p j 1 p j 2 p j n p k 1 p k 2 p k n p n 1 p n 2 p n n X R(Modular Neural Network (Market Volatility Analysis)) X S(n):→ (n+4 weeks) S = s 1 s 2 s 3

n:Time series to forecast

p:Price signals of HD stock

j:Nash equilibria

k:Dominated move

a:Best response for target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do AC Investment Research machine learning (predictive) algorithms actually work?

HD Stock Forecast (Buy or Sell) for (n+4 weeks)

Sample Set: Neural Network
Stock/Index: HD Home Depot
Time series to forecast n: 13 Oct 2022 for (n+4 weeks)

According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell HD stock.

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Yellow to Green): *Technical Analysis%


Conclusions

Home Depot assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) with Logistic Regression1,2,3,4 and conclude that the HD stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell HD stock.

Financial State Forecast for HD Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3B1
Operational Risk 7535
Market Risk6575
Technical Analysis6062
Fundamental Analysis4862
Risk Unsystematic8055

Prediction Confidence Score

Trust metric by Neural Network: 79 out of 100 with 595 signals.

References

  1. Lai TL, Robbins H. 1985. Asymptotically efficient adaptive allocation rules. Adv. Appl. Math. 6:4–22
  2. Jiang N, Li L. 2016. Doubly robust off-policy value evaluation for reinforcement learning. In Proceedings of the 33rd International Conference on Machine Learning, pp. 652–61. La Jolla, CA: Int. Mach. Learn. Soc.
  3. Bai J. 2003. Inferential theory for factor models of large dimensions. Econometrica 71:135–71
  4. D. White. Mean, variance, and probabilistic criteria in finite Markov decision processes: A review. Journal of Optimization Theory and Applications, 56(1):1–29, 1988.
  5. Bessler, D. A. R. A. Babula, (1987), "Forecasting wheat exports: Do exchange rates matter?" Journal of Business and Economic Statistics, 5, 397–406.
  6. Dimakopoulou M, Athey S, Imbens G. 2017. Estimation considerations in contextual bandits. arXiv:1711.07077 [stat.ML]
  7. Matzkin RL. 1994. Restrictions of economic theory in nonparametric methods. In Handbook of Econometrics, Vol. 4, ed. R Engle, D McFadden, pp. 2523–58. Amsterdam: Elsevier
Frequently Asked QuestionsQ: What is the prediction methodology for HD stock?
A: HD stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) and Logistic Regression
Q: Is HD stock a buy or sell?
A: The dominant strategy among neural network is to Sell HD Stock.
Q: Is Home Depot stock a good investment?
A: The consensus rating for Home Depot is Sell and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of HD stock?
A: The consensus rating for HD is Sell.
Q: What is the prediction period for HD stock?
A: The prediction period for HD is (n+4 weeks)

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