Very poor diversification

The 3 months correlation between Amazon and Alphabet is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Com Inc and Alphabet Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Com are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Amazon i.e. Amazon and Alphabet go up and down completely randomly.