What is a Significant Mover?
A significant mover is a stock that has moved, in the last 24 hours, more than we might normally expect it to. If a stock moves on average 3% a day, a significant mover would be any move in excess of that (by a margin).
At Upside, we notify users of this move as it is abnormal and might it be a reason to look into the company in more detail. An uptick in volatility might be a moment to cut or add to a position, given a change in newsflow or investor interest.
What you need to know:
- A significant mover is a stock that has moved, in the last 24 hours, more than we might normally expect it to.
- Abnormal price movements are an indicator that you may want to look into the company in a little more detail.
- If we can differentiate the significance of price movements, we can determine whether a price change is something to pay close attention to, or if it's something that might mean less.
Let's say that over a 24-hour period, the price of 'Stock A' has increased by $2 and the price of 'Stock B' has increased by $4.
Which of these is more impactful? We obviously know that without the knowledge of the actual share price, it's impossible to compare the price changes. The first step is to normalise the changes by converting them to percentage changes.
If 'Stock A' had an original price of $100, the $2 change is an increase of 2%.
If 'Stock B' had an original price of $400, the $4 change is an increase of 1%.
If you had the same value of both of these stocks in your portfolio, the impact of 'Stock A's' price increase would have been larger, as you can see in the example below:
|Stock||Amount Invested ($)||Original Share Price ($)||No. of Shares||New Share Price ($)||Value of Shares ($)|
But the next question we ask is, how significant is each price change? Or phrased differently, given that prices change all the time, can we classify a price change as a normal price change or a price change where something outside the norm has happened?
The significance of a price move is determined by first calculating the z-score for that price move.
Why should I care?
If we can differentiate the significance of price movements, we can determine whether a price change is something to pay close attention to, or if it's something that might mean less.
To do this, we have to compare the price change amount to what we might reasonably expect the price change to be on any given day.
For example, if, the usual price change on a daily basis for Apple is 0.01%, but today, the price changed by 0.5%, then we might say, yes that's a significant price change.
This is what we mean by a significant mover - has its price changed by more than we would normally expect it to, given its historical volatility?
This means we can compare price moves across different types of companies, from large, stable stocks that are unlikely to have large price changes, to more volatile, smaller companies.
The below charts illustrate this - we compare GameStop, a very volatile stock in 2021, with a stable large-cap company, Visa.
The charts only look at the past three months of data (after the most volatile period for GameStop), but it's still clearly visible how much more volatile the price is compared to Visa. The bars show the percentage price change each day for both stocks.
In this context, if, tomorrow, the GameStop price changed by 5%, would it be significant? Not very. However, a price change of 5% for Visa would be bigger than any single price change during this three month period.
Mathematically, we classify a significant price move as one that has moved more than 1 standard deviation from the mean price changes over the past 60 days.