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Question 884565: If a stock price goes from $10 to $12 from january 1st to january 31st , and from $12 to $9 from february 1st to february 28th, is the price change from $10 to $9 a straight line?.
How can i use two pieces of lines to describe the price movements from the beginning of january to the end of february?.
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! if you're working off absolute values of data, then straight lines are ok.
you would have one straight line from beginning of january to end of january and another straight line from beginning of february to end of february.
end of january and beginning of february would be the same point on the chart.
those points are often referred to as time points.
those lines would show you the monthly variation in the price of the stock.
you could also have an overall change from beginning of january to end of february.
that would give you the overall change rather than the month to month change.
a lot of time, the stock changes are described by percent change.
from beginning of january to end of january would be a 20% change in a positive direction.
from beginning of february to end of february would be a 25% change in a negative direction.
the overall change from beginning of january to end of february wouuld be a 10
% change in a negative direction.
the average monthly change from beginning of january to end of february would be approximately a 5% change in a negative direction each year.
there are also trend lines that correlate the change in the value of the stock compared to time.
these trend line can be straight lines or curved lines.
they are usually based on a line of best fit which means a line that minimizes the distances of each point on the graph from the line.
these lines are generated by software because it is way too manually intensive to do without the use of software.
a lot of regression lines are straight lines, but curved lines can be used as well.
there are curve fitting programs that will take a series of data and then generate an equation that creates a curved line that best fits the pattern of data by minimizing the distance from each point to the line.
these trend lines do not necessarily contain the data points on them, but the distance between those points and the line is minimized.
percent change in the price of the stock is widely used, as well as average yearly or monthly change in the price of the stock.
also average percent change for the last 3 years, the last 5 years, the last 10 years is used as well.
there are many ways to display the data, and new ways are constantly generated to help the investor analyze the stock.
you need only to determine the best way to display the data for your needs.
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