Optimal Hedge Ratio Calculator: Minimize Portfolio Risk Effectively

Calculate Your Optimal Hedge Ratio

Enter the covariance between the returns of the spot asset and the futures contract.
Enter the variance of the returns of the futures contract.

Discover how to calculate the optimal hedge ratio to effectively minimize risk in your portfolio using futures contracts. Our tool simplifies complex financial calculations for smarter investment strategies.

Formula:

The Optimal Hedge Ratio (h*) is calculated using the formula:

h* = Cov(S, F) / Var(F)

  • h* = Optimal Hedge Ratio
  • Cov(S, F) = Covariance between Spot Price Returns and Futures Price Returns
  • Var(F) = Variance of Futures Price Returns

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