CMS Stochastic model prediction capability
The model employs a 5,000-scenario simulation (shown above) combined with change detection for short-term share price prediction. The red line represents the predicted mean price, along with the predicted three standard deviations, while the green line reflects the actual share price recorded during the predicted period.
Area represented within the 1st Standard Deviation from the mean value up and down is considered a fair price for the stock chosen whilst the area above the 1st standard deviation is overvalued and 1st standard deviation below the mean value is considered undervalued. Buy and sell strategies can be implemented using this prediction and we can see that the model does a good job in terms of prediction by comparing predicted to actual results in the sample provided.