Optimal Hedge Ratio (OHR) Calculator
Calculate the optimal hedge ratio with our calculator. Input correlation coefficient, spot and future price standard deviations for a precise result.
Result Optimal Hedge Ratio 0 optimalHedgeRatio
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Formula
Example
The correlation coefficient between the spot price and future price of the asset is 0.8. The spot price standard deviation is $5.00 and the future price standard deviation is $3.50. Optimal hedge ratio = 0.8 * ($5.00 / $3.50) = 1.143
Meaning
The Optimal Hedge Ratio (OHR) is a measure used to determine the ideal amount of hedging needed to mitigate potential losses in a portfolio. It helps investors understand how much they should hedge their investments against market fluctuations, thereby reducing risk and increasing stability.
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