Correlation Between Bank of America and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both Bank of America and Invesco FTSE 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 FTSE 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 FTSE RAFI, you can compare the effects of market volatilities on Bank of America and Invesco FTSE 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 FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Invesco FTSE.
Diversification Opportunities for Bank of America and Invesco FTSE
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Bank of America i.e., Bank of America and Invesco FTSE go up and down completely randomly.
Pair Corralation between Bank of America and Invesco FTSE
Considering the 90-day investment horizon Bank of America is expected to under-perform the Invesco FTSE. In addition to that, Bank of America is 1.79 times more volatile than Invesco FTSE RAFI. It trades about -0.31 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about -0.04 per unit of volatility. If you would invest 6,546 in Invesco FTSE RAFI on November 27, 2024 and sell it today you would lose (28.00) from holding Invesco FTSE RAFI or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Invesco FTSE RAFI
Performance |
| Timeline |
| Bank of America |
| Invesco FTSE RAFI |
Bank of America and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Invesco FTSE
The main advantage of trading using opposite Bank of America and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Invesco FTSE 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 FTSE will offset losses from the drop in Invesco FTSE's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Invesco FTSE vs. iShares SPTSX 60 | Invesco FTSE vs. iShares Core SP | Invesco FTSE vs. iShares Core SPTSX | Invesco FTSE vs. BMO Aggregate Bond |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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