Correlation Between Jindal Steel and Sapphire Foods

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

By analyzing existing cross correlation between Jindal Steel Power and Sapphire Foods India, you can compare the effects of market volatilities on Jindal Steel and Sapphire Foods 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 Jindal Steel with a short position of Sapphire Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Steel and Sapphire Foods.

Diversification Opportunities for Jindal Steel and Sapphire Foods

0.49

Correlation Coefficient

Jindal Steel  Sapphire Foods

Very weak diversification

The 3 months correlation between Jindal and Sapphire is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods India and Jindal Steel 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 Jindal Steel Power are associated (or correlated) with Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of Jindal Steel i.e., Jindal Steel and Sapphire Foods go up and down completely randomly.

Pair Corralation between Jindal Steel and Sapphire Foods

Assuming the 90 days trading horizon Jindal Steel Power is expected to generate 0.6 times more return on investment than Sapphire Foods. However, Jindal Steel Power is 1.66 times less risky than Sapphire Foods. It trades about 0.0 of its potential returns per unit of risk. Sapphire Foods India is currently generating about -0.05 per unit of risk. If you would invest  91,830  in Jindal Steel Power on December 29, 2024 and sell it today you would lose (600.00) from holding Jindal Steel Power or give up 0.65% of portfolio value over 90 days.

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

Jindal Steel Power  vs.  Sapphire Foods India

Jindal Steel Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jindal Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sapphire Foods India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Jindal Steel and Sapphire Foods

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

The idea behind Jindal Steel Power and Sapphire Foods India 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.