Correlation Between JSW Steel and Steelcast

Can any of the company-specific risk be diversified away by investing in both JSW Steel and Steelcast 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 Steelcast 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 Steelcast Limited, you can compare the effects of market volatilities on JSW Steel and Steelcast 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 Steelcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSW Steel and Steelcast.

Diversification Opportunities for JSW Steel and Steelcast

0.39

Correlation Coefficient

JSW Steel  Steelcast

Weak diversification

The 3 months correlation between JSW and Steelcast is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Steelcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcast Limited 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 Steelcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcast Limited has no effect on the direction of JSW Steel i.e., JSW Steel and Steelcast go up and down completely randomly.

Pair Corralation between JSW Steel and Steelcast

Assuming the 90 days trading horizon JSW Steel is expected to generate 26.91 times less return on investment than Steelcast. But when comparing it to its historical volatility, JSW Steel Limited is 1.53 times less risky than Steelcast. It trades about 0.01 of its potential returns per unit of risk. Steelcast Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  88,390  in Steelcast Limited on April 20, 2025 and sell it today you would earn a total of  29,720  from holding Steelcast Limited or generate 33.62% 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.  Steelcast Limited

JSW Steel Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, JSW Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Steelcast Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Steel and Steelcast

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

The idea behind JSW Steel Limited and Steelcast Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.