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%

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.