Hedge Ratio Calculator

Determine the ideal hedge ratio for your investments and mitigate potential losses. Our easy-to-use tool will help you make informed decisions and manage your portfolio with confidence. Try it now!

Result Hedge Ratio 0%

More Calculators: Value at Risk (VaR), Compound, FIRE, Savings Withdrawal, Portfolio Beta,

Hedge Ratio Formula

Hedge Ratio % = Value of Portfolio Hedge / Value of Portfolio x 100

Where:

• Hedge Ratio % is the hedge ratio expressed as a percentage
• Value of Portfolio Hedge is the value of the hedging instrument used to hedge the portfolio
• Value of Portfolio is the total value of the portfolio

Hedge Ratio Example

Let's say you have a portfolio of stocks worth \$100,000, and you want to hedge against potential losses. You decide to use futures contracts as your hedging instrument. The total value of your futures contract is \$50,000.

To calculate your hedge ratio, you need to divide the value of your futures contract by the total value of your portfolio:

Hedge Ratio = Hedge Value / Total Position Value

Hedge Ratio = \$50,000 / \$100,000

Hedge Ratio = 0.5 or 50%

So in this case, your hedge ratio is 50%. This means that you are hedging 50% of your portfolio's value using futures contracts. The remaining 50% is still exposed to market risk.

Note: The actual value of the hedge ratio depends on your specific hedging strategy and risk tolerance, and may vary depending on market conditions.

More Articles