Correlation Between JSW Steel and Blue Coast

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

By analyzing existing cross correlation between JSW Steel Limited and Blue Coast Hotels, you can compare the effects of market volatilities on JSW Steel and Blue Coast 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 JSW Steel with a short position of Blue Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSW Steel and Blue Coast.

Diversification Opportunities for JSW Steel and Blue Coast

0.38

Correlation Coefficient

JSW Steel  Blue Coast

Weak diversification

The 3 months correlation between JSW and Blue is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Blue Coast Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Coast Hotels and JSW 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 JSW Steel Limited are associated (or correlated) with Blue Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Coast Hotels has no effect on the direction of JSW Steel i.e., JSW Steel and Blue Coast go up and down completely randomly.

Pair Corralation between JSW Steel and Blue Coast

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.51 times more return on investment than Blue Coast. However, JSW Steel Limited is 1.97 times less risky than Blue Coast. It trades about 0.26 of its potential returns per unit of risk. Blue Coast Hotels is currently generating about -0.08 per unit of risk. If you would invest  96,855  in JSW Steel Limited on April 5, 2025 and sell it today you would earn a total of  7,755  from holding JSW Steel Limited or generate 8.01% return on investment over 90 days.

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

JSW Steel Limited  vs.  Blue Coast Hotels

JSW Steel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, JSW Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Coast Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Coast Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with JSW Steel and Blue Coast

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

The idea behind JSW Steel Limited and Blue Coast Hotels 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.