Question

What does this graph tell me ?

How can I interpret this?

Nike actual vs. predicted returns from August 28, 2019 to November 19, 2019 21-686107 960 ftoz DOOT 2019-1908 2019-10-16 2019

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Answer #1

This graph shows us the predicted (expected) rate of return vs actual rate of return of Nike stock.

There is a positive correlation between predicted returns and actual returns.

It is important to notice that the volatility of predicted returns is greater than the actual returns.

The volatility is not good because predicted returns has started higher than actual returns but ended with lower than actual returns.

When predicted returns is higher than actual returns, the company is destroying shareholders value.
Which is evident from a decrease in actual returns.

The expectation of shareholders is not clear due to this volatility and one should either sell this stock or hold this stock (if he already has it), there should be no fresh Investment.

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