Correlation Between Bank of America and Invesco India

Can any of the company-specific risk be diversified away by investing in both Bank of America and Invesco India at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of America and Invesco India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of America and Invesco India ETF, you can compare the effects of market volatilities on Bank of America and Invesco India and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of America with a short position of Invesco India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Invesco India.

Diversification Opportunities for Bank of America and Invesco India

0.2

Correlation Coefficient

Bank of America  Invesco India

Modest diversification

The 3 months correlation between Bank and Invesco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Invesco India ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco India ETF and Bank of America is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank of America are associated (or correlated) with Invesco India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco India ETF has no effect on the direction of Bank of America i.e., Bank of America and Invesco India go up and down completely randomly.

Pair Corralation between Bank of America and Invesco India

Considering the 90-day investment horizon Bank of America is expected to generate 1.73 times more return on investment than Invesco India. However, Bank of America is 1.73 times more volatile than Invesco India ETF. It trades about -0.03 of its potential returns per unit of risk. Invesco India ETF is currently generating about -0.11 per unit of risk. If you would invest  4,311  in Bank of America on December 19, 2024 and sell it today you would lose (146.00) from holding Bank of America or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  Invesco India ETF

Bank of America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco India ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco India ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Bank of America and Invesco India

The main advantage of trading using opposite Bank of America and Invesco India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Invesco India can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco India will offset losses from the drop in Invesco India's long position.

The idea behind Bank of America and Invesco India ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.