Correlation Between 74SW and Lectra SA

Can any of the company-specific risk be diversified away by investing in both 74SW and Lectra SA 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 74SW and Lectra SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 74SW and Lectra SA, you can compare the effects of market volatilities on 74SW and Lectra SA 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 74SW with a short position of Lectra SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of 74SW and Lectra SA.

Diversification Opportunities for 74SW and Lectra SA

0.17

Correlation Coefficient

74SW  Lectra SA

Average diversification

The 3 months correlation between 74SW and Lectra is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding 74SW and Lectra SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lectra SA and 74SW 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 74SW are associated (or correlated) with Lectra SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lectra SA has no effect on the direction of 74SW i.e., 74SW and Lectra SA go up and down completely randomly.

Pair Corralation between 74SW and Lectra SA

Assuming the 90 days trading horizon 74SW is expected to generate 1.07 times more return on investment than Lectra SA. However, 74SW is 1.07 times more volatile than Lectra SA. It trades about 0.19 of its potential returns per unit of risk. Lectra SA is currently generating about 0.03 per unit of risk. If you would invest  3,010  in 74SW on April 20, 2025 and sell it today you would earn a total of  1,040  from holding 74SW or generate 34.55% return on investment over 90 days.

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

74SW  vs.  Lectra SA

74SW

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 74SW are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 74SW sustained solid returns over the last few months and may actually be approaching a breakup point.

Lectra SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lectra SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lectra SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 74SW and Lectra SA

The main advantage of trading using opposite 74SW and Lectra SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 74SW position performs unexpectedly, Lectra SA 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 Lectra SA will offset losses from the drop in Lectra SA's long position.

The idea behind 74SW and Lectra SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.