Hedge Ratio Calculator

Your details

Simple: divide hedge value by position value. Optimal: uses correlation and volatility to minimize variance. Futures: how many contracts to achieve a target hedge ratio.
The full market value of the asset or portfolio you want to hedge.
USD
The current market value of your hedging instrument (futures, options, inverse ETF, etc.).
USD
Hedge ratioPartially hedged
37.5%

Proportion of total exposure that is hedged

Hedged exposure375,000USD
Unhedged exposure625,000USD
37.5% %
Lightly hedged<25%Partially hedged25%-50%Moderately hedged50%-75%Well hedged75%+

Hedge ratio: 37.5% - partially hedged.

  • Your hedged exposure is $375,000, leaving $625,000 unprotected.
  • A higher hedge ratio reduces downside risk but also limits upside potential if the position moves in your favour.
  • Transaction costs, bid-ask spreads, and margin requirements are not included in this calculation.

Next stepFor a complete risk picture, combine your hedge ratio with basis risk analysis, correlation monitoring, and a review of margin and rolling costs.

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