Does algo trading work? (HD Stock Forecast)

The study of financial markets has been addressed in many works during the last years. Different methods have been used in order to capture the non-linear behavior which is characteristic of these complex systems. The development of profitable strategies has been associated with the predictive character of the market movement, and special attention has been devoted to forecast the trends of financial markets. We evaluate The Home Depot prediction models with Modular Neural Network (CNN Layer) and Factor^1,2,3,4 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 Hold HD stock.

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

Key Points

1. Probability Distribution
2. How accurate is machine learning in stock market?
3. Reaction Function

HD Target Price Prediction Modeling Methodology

Sentiment Analysis is new way of machine learning to extract opinion orientation (positive, negative, neutral) from a text segment written for any product, organization, person or any other entity. Sentiment Analysis can be used to predict the mood of people that have impact on stock prices, therefore it can help in prediction of actual stock movement. We consider The Home Depot Stock Decision Process with Factor 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(Factor)^5,6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Modular Neural Network (CNN Layer)) X S(n):→ (n+4 weeks) $R=\left(\begin{array}{ccc}1& 0& 0\\ 0& 1& 0\\ 0& 0& 1\end{array}\right)$

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 The Home Depot
Time series to forecast n: 16 Nov 2022 for (n+4 weeks)

According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Hold 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%

Adjusted IFRS* Prediction Methods for The Home Depot

1. In cases such as those described in the preceding paragraph, to designate, at initial recognition, the financial assets and financial liabilities not otherwise so measured as at fair value through profit or loss may eliminate or significantly reduce the measurement or recognition inconsistency and produce more relevant information. For practical purposes, the entity need not enter into all of the assets and liabilities giving rise to the measurement or recognition inconsistency at exactly the same time. A reasonable delay is permitted provided that each transaction is designated as at fair value through profit or loss at its initial recognition and, at that time, any remaining transactions are expected to occur.
2. As noted in paragraph B4.3.1, when an entity becomes a party to a hybrid contract with a host that is not an asset within the scope of this Standard and with one or more embedded derivatives, paragraph 4.3.3 requires the entity to identify any such embedded derivative, assess whether it is required to be separated from the host contract and, for those that are required to be separated, measure the derivatives at fair value at initial recognition and subsequently. These requirements can be more complex, or result in less reliable measures, than measuring the entire instrument at fair value through profit or loss. For that reason this Standard permits the entire hybrid contract to be designated as at fair value through profit or loss.
3. If subsequently an entity reasonably expects that the alternative benchmark rate will not be separately identifiable within 24 months from the date the entity designated it as a non-contractually specified risk component for the first time, the entity shall cease applying the requirement in paragraph 6.9.11 to that alternative benchmark rate and discontinue hedge accounting prospectively from the date of that reassessment for all hedging relationships in which the alternative benchmark rate was designated as a noncontractually specified risk component.
4. An entity that first applies these amendments after it first applies this Standard shall apply paragraphs 7.2.32–7.2.34. The entity shall also apply the other transition requirements in this Standard necessary for applying these amendments. For that purpose, references to the date of initial application shall be read as referring to the beginning of the reporting period in which an entity first applies these amendments (date of initial application of these amendments).

*International Financial Reporting Standards (IFRS) are a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.

Conclusions

The Home Depot assigned short-term B3 & long-term B2 forecasted stock rating. We evaluate the prediction models Modular Neural Network (CNN Layer) with Factor^1,2,3,4 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 Hold HD stock.

Financial State Forecast for HD The Home Depot Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	B3	B2
Operational Risk	31	79
Market Risk	44	45
Technical Analysis	37	32
Fundamental Analysis	38	48
Risk Unsystematic	90	61

Prediction Confidence Score

Trust metric by Neural Network: 74 out of 100 with 603 signals.

References

1. Dudik M, Langford J, Li L. 2011. Doubly robust policy evaluation and learning. In Proceedings of the 28th International Conference on Machine Learning, pp. 1097–104. La Jolla, CA: Int. Mach. Learn. Soc.
2. M. L. Littman. Markov games as a framework for multi-agent reinforcement learning. In Ma- chine Learning, Proceedings of the Eleventh International Conference, Rutgers University, New Brunswick, NJ, USA, July 10-13, 1994, pages 157–163, 1994
3. A. Shapiro, W. Tekaya, J. da Costa, and M. Soares. Risk neutral and risk averse stochastic dual dynamic programming method. European journal of operational research, 224(2):375–391, 2013
4. J. Ott. A Markov decision model for a surveillance application and risk-sensitive Markov decision processes. PhD thesis, Karlsruhe Institute of Technology, 2010.
5. Andrews, D. W. K. (1993), "Tests for parameter instability and structural change with unknown change point," Econometrica, 61, 821–856.
6. P. Artzner, F. Delbaen, J. Eber, and D. Heath. Coherent measures of risk. Journal of Mathematical Finance, 9(3):203–228, 1999
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 Questions

Q: What is the prediction methodology for HD stock?
A: HD stock prediction methodology: We evaluate the prediction models Modular Neural Network (CNN Layer) and Factor
Q: Is HD stock a buy or sell?
A: The dominant strategy among neural network is to Hold HD Stock.
Q: Is The Home Depot stock a good investment?
A: The consensus rating for The Home Depot is Hold and assigned short-term B3 & long-term B2 forecasted stock rating.
Q: What is the consensus rating of HD stock?
A: The consensus rating for HD is Hold.
Q: What is the prediction period for HD stock?
A: The prediction period for HD is (n+4 weeks)

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