Correlation Between ORIX and Reliance Steel

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

By analyzing existing cross correlation between ORIX Corporation and Reliance Steel Aluminum, you can compare the effects of market volatilities on ORIX and Reliance Steel 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 ORIX with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX and Reliance Steel.

Diversification Opportunities for ORIX and Reliance Steel

0.8

Correlation Coefficient

ORIX  Reliance Steel

Very poor diversification

The 3 months correlation between ORIX and Reliance is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and ORIX 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 ORIX Corporation are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of ORIX i.e., ORIX and Reliance Steel go up and down completely randomly.

Pair Corralation between ORIX and Reliance Steel

Assuming the 90 days horizon ORIX is expected to generate 1.8 times less return on investment than Reliance Steel. But when comparing it to its historical volatility, ORIX Corporation is 1.1 times less risky than Reliance Steel. It trades about 0.14 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  23,455  in Reliance Steel Aluminum on April 20, 2025 and sell it today you would earn a total of  4,965  from holding Reliance Steel Aluminum or generate 21.17% return on investment over 90 days.

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

ORIX Corp.  vs.  Reliance Steel Aluminum

ORIX

Risk-Adjusted Performance

OK

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, ORIX may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Reliance Steel Aluminum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORIX and Reliance Steel

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

The idea behind ORIX Corporation and Reliance Steel Aluminum 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.