Correlation Between Morgan Stanley and IndexIQ Active

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and IndexIQ Active 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 Morgan Stanley and IndexIQ Active into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morgan Stanley Direct and IndexIQ Active ETF, you can compare the effects of market volatilities on Morgan Stanley and IndexIQ Active 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 Morgan Stanley with a short position of IndexIQ Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and IndexIQ Active.

Diversification Opportunities for Morgan Stanley and IndexIQ Active

-0.5

Correlation Coefficient

Morgan Stanley  IndexIQ Active

Very good diversification

The 3 months correlation between Morgan and IndexIQ is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and IndexIQ Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ Active ETF and Morgan Stanley 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 Morgan Stanley Direct are associated (or correlated) with IndexIQ Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ Active ETF has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and IndexIQ Active go up and down completely randomly.

Pair Corralation between Morgan Stanley and IndexIQ Active

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the IndexIQ Active. In addition to that, Morgan Stanley is 4.56 times more volatile than IndexIQ Active ETF. It trades about -0.01 of its total potential returns per unit of risk. IndexIQ Active ETF is currently generating about -0.01 per unit of volatility. If you would invest  2,126  in IndexIQ Active ETF on December 28, 2024 and sell it today you would lose (4.00) from holding IndexIQ Active ETF or give up 0.19% of portfolio value over 90 days.

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

Morgan Stanley Direct  vs.  IndexIQ Active ETF

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

IndexIQ Active ETF

Risk-Adjusted Performance

Weak

Over the last 90 days IndexIQ Active ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, IndexIQ Active is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and IndexIQ Active

The main advantage of trading using opposite Morgan Stanley and IndexIQ Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, IndexIQ Active 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 IndexIQ Active will offset losses from the drop in IndexIQ Active's long position.

The idea behind Morgan Stanley Direct and IndexIQ Active 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.