Correlation Between Morningstar and FactSet Research

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

By analyzing existing cross correlation between Morningstar and FactSet Research Systems, you can compare the effects of market volatilities on Morningstar and FactSet Research 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 Morningstar with a short position of FactSet Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar and FactSet Research.

Diversification Opportunities for Morningstar and FactSet Research

0.91

Correlation Coefficient

Morningstar  FactSet Research

Almost no diversification

The 3 months correlation between Morningstar and FactSet is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar and FactSet Research Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FactSet Research Systems and Morningstar 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 Morningstar are associated (or correlated) with FactSet Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FactSet Research Systems has no effect on the direction of Morningstar i.e., Morningstar and FactSet Research go up and down completely randomly.

Pair Corralation between Morningstar and FactSet Research

Given the investment horizon of 90 days Morningstar is expected to under-perform the FactSet Research. In addition to that, Morningstar is 1.21 times more volatile than FactSet Research Systems. It trades about -0.16 of its total potential returns per unit of risk. FactSet Research Systems is currently generating about -0.1 per unit of volatility. If you would invest  48,158  in FactSet Research Systems on December 30, 2024 and sell it today you would lose (3,282) from holding FactSet Research Systems or give up 6.82% of portfolio value over 90 days.

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

Morningstar  vs.  FactSet Research Systems

Morningstar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morningstar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

FactSet Research Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days FactSet Research Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Morningstar and FactSet Research

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

The idea behind Morningstar and FactSet Research Systems 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.