Correlation Between Citigroup and IShares Biotechnology

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

By analyzing existing cross correlation between Citigroup and iShares Biotechnology ETF, you can compare the effects of market volatilities on Citigroup and IShares Biotechnology 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 Citigroup with a short position of IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and IShares Biotechnology.

Diversification Opportunities for Citigroup and IShares Biotechnology

0.83

Correlation Coefficient

Citigroup  IShares Biotechnology

Very poor diversification

The 3 months correlation between Citigroup and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF and Citigroup 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 Citigroup are associated (or correlated) with IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of Citigroup i.e., Citigroup and IShares Biotechnology go up and down completely randomly.

Pair Corralation between Citigroup and IShares Biotechnology

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.96 times more return on investment than IShares Biotechnology. However, Citigroup is 1.04 times less risky than IShares Biotechnology. It trades about 0.29 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about 0.06 per unit of risk. If you would invest  7,024  in Citigroup on May 4, 2025 and sell it today you would earn a total of  2,159  from holding Citigroup or generate 30.74% return on investment over 90 days.

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

Citigroup  vs.  iShares Biotechnology ETF

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares Biotechnology ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Biotechnology ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, IShares Biotechnology may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Citigroup and IShares Biotechnology

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

The idea behind Citigroup and iShares Biotechnology ETF 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.