Correlation Between McDonalds and ProShares

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

By analyzing existing cross correlation between McDonalds and ProShares SP 500, you can compare the effects of market volatilities on McDonalds and ProShares 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 McDonalds with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and ProShares.

Diversification Opportunities for McDonalds and ProShares

-0.67

Correlation Coefficient

McDonalds  ProShares

Excellent diversification

The 3 months correlation between McDonalds and ProShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and McDonalds 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 McDonalds are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of McDonalds i.e., McDonalds and ProShares go up and down completely randomly.

Pair Corralation between McDonalds and ProShares

Considering the 90-day investment horizon McDonalds is expected to under-perform the ProShares. In addition to that, McDonalds is 1.23 times more volatile than ProShares SP 500. It trades about -0.06 of its total potential returns per unit of risk. ProShares SP 500 is currently generating about 0.29 per unit of volatility. If you would invest  6,070  in ProShares SP 500 on May 7, 2025 and sell it today you would earn a total of  870.00  from holding ProShares SP 500 or generate 14.33% return on investment over 90 days.

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

McDonalds  vs.  ProShares SP 500

McDonalds

Risk-Adjusted Performance

Very Weak

Over the last 90 days McDonalds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProShares showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and ProShares

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

The idea behind McDonalds and ProShares SP 500 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.