Correlation Between Steelcast and Sapphire Foods

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

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

Diversification Opportunities for Steelcast and Sapphire Foods

0.6

Correlation Coefficient

Steelcast  Sapphire Foods

Poor diversification

The 3 months correlation between Steelcast and Sapphire is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited 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 Steelcast 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 Steelcast Limited 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 Steelcast i.e., Steelcast and Sapphire Foods go up and down completely randomly.

Pair Corralation between Steelcast and Sapphire Foods

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 1.28 times more return on investment than Sapphire Foods. However, Steelcast is 1.28 times more volatile than Sapphire Foods India. It trades about 0.19 of its potential returns per unit of risk. Sapphire Foods India is currently generating about 0.07 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Steelcast Limited  vs.  Sapphire Foods India

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.

Sapphire Foods India

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sapphire Foods India are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Sapphire Foods may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Steelcast and Sapphire Foods

The main advantage of trading using opposite Steelcast and Sapphire Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steelcast 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 Steelcast Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.