Correlation Between FactSet Research and Morningstar

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

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

Diversification Opportunities for FactSet Research and Morningstar

0.87

Correlation Coefficient

FactSet Research  Morningstar

Very poor diversification

The 3 months correlation between FactSet and Morningstar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar and FactSet Research 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 FactSet Research Systems are associated (or correlated) with Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar has no effect on the direction of FactSet Research i.e., FactSet Research and Morningstar go up and down completely randomly.

Pair Corralation between FactSet Research and Morningstar

Considering the 90-day investment horizon FactSet Research Systems is expected to generate 0.78 times more return on investment than Morningstar. However, FactSet Research Systems is 1.28 times less risky than Morningstar. It trades about 0.02 of its potential returns per unit of risk. Morningstar is currently generating about -0.03 per unit of risk. If you would invest  45,505  in FactSet Research Systems on February 14, 2025 and sell it today you would earn a total of  482.00  from holding FactSet Research Systems or generate 1.06% return on investment over 90 days.

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

FactSet Research Systems  vs.  Morningstar

FactSet Research Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 very healthy basic indicators, Morningstar is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FactSet Research and Morningstar

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

The idea behind FactSet Research Systems and Morningstar 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.