Correlation Between Amazon and Goldman Sachs

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

By analyzing existing cross correlation between Amazon Inc and The Goldman Sachs, you can compare the effects of market volatilities on Amazon and Goldman Sachs 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 Amazon with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Goldman Sachs.

Diversification Opportunities for Amazon and Goldman Sachs

0.87

Correlation Coefficient

Amazon  Goldman Sachs

Very poor diversification

The 3 months correlation between Amazon and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Amazon 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 Amazon Inc are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Amazon i.e., Amazon and Goldman Sachs go up and down completely randomly.

Pair Corralation between Amazon and Goldman Sachs

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Goldman Sachs. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.42 times less risky than Goldman Sachs. The stock trades about -0.12 of its potential returns per unit of risk. The The Goldman Sachs is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  11,779  in The Goldman Sachs on December 30, 2024 and sell it today you would lose (1,377) from holding The Goldman Sachs or give up 11.69% of portfolio value over 90 days.

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

Amazon Inc  vs.  The Goldman Sachs

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Goldman Sachs

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Goldman Sachs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Amazon and Goldman Sachs

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

The idea behind Amazon Inc and The Goldman Sachs 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.