Hedge Ratio Calculator
Determine the ideal hedge ratio for your investments and mitigate potential losses. Our easytouse tool will help you make informed decisions and manage your portfolio with confidence. Try it now!
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.

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