Using Autocorrelation Characteristics To Pick Stocks

Autocorrelation characteristics of Exxon Mobil [XOM] Autocorrelation characteristics of Petroleo Brasileiro [PBR.A] Autocorrelation characteristics of Statoil [STO] Autocorrelation characteristics of Google [GOOG] * click on images for full-size and details. It is a fact that a stock's past price affects its current price. i.e. A stock's price is correlated with itself for any given period of lag. A less technical explanation of this phenomenon would be that investors look to a stock's past price as a guide for future prices. The 'collective memory' of a stock's investors thus manifests itself as its autocorrelation characteristic. The degree of autocorrelation [AC], and the total effect over time varys greatly with each stock. In the context of ValuEngine's Valuation model, a high autocorrelation level indicates high persistence in over or undervaluation, and a long period to correct the mispricing. If we know the AC characteristics of a stock, it can be...