Minimum Variance Hedge Ratio Calculator
Free minimum variance hedge ratio calculator computes optimal futures hedge ratio from correlation and volatilities plus contracts to hedge spot exposure.
How It Works
Enter the inputs described in each field label for Minimum Variance Hedge Ratio Calculator. Adjust the inputs above to see how changes affect the projection.
Minimum variance hedge ratio minimizes the variance of the hedged position using spot and futures volatilities and their correlation. Pair with Portfolio Beta and Asset Correlation Matrix on portfolios.tools when designing multi asset hedges. Numbers update instantly so you can pressure test assumptions quickly.
Pair with Portfolio Beta and Asset Correlation Matrix on portfolios.tools when designing multi asset hedges.
Bookmark the page for quick reruns without installing software.
Step by step
- Open Minimum Variance Hedge Ratio Calculator and enter your current inputs.
- Review calculated outputs and summary tables.
- Adjust assumptions and compare scenarios side by side.
Worked example
Adjust one input at a time to see sensitivity.
Common mistakes
Confirm tickers, percentages, and dates before acting.
Running a single baseline scenario ignores tail risks.
The Formula
h* = ρ × (σspot ÷ σfutures)
Contracts = (h* × Spot Exposure) ÷ Contract Size
Volatilities should use consistent units and horizon. Contract size is notional per futures contract.
Limitations and assumptions
Volatilities should use consistent units and horizon. Contract size is notional per futures contract. Minimum Variance Hedge Ratio Calculator does not replace personalized advice.
Key terms
- What does Minimum Variance Hedge Ratio Calculator measure
- Minimum variance hedge ratio minimizes the variance of the hedged position using spot and futures volatilities and their correlation.
- How is the formula applied
- The formula block on this page shows every intermediate step so you can audit the math against textbook definitions.
- Model assumption
- Interpret results in context rather than as automatic buy, sell, or accept signals.
Compare alternatives
Pair with Portfolio Beta and Asset Correlation Matrix on portfolios.
FAQ
What does Minimum Variance Hedge Ratio Calculator measure?
Minimum variance hedge ratio minimizes the variance of the hedged position using spot and futures volatilities and their correlation. This calculator runs entirely in your browser on portfolios.tools. The formulas and any bundled reference data are documented below.
How is the formula applied in Minimum Variance Hedge Ratio Calculator?
Volatilities should use consistent units and horizon. Contract size is notional per futures contract. You can change any input and rerun the calculation as many times as you like. Comparing scenarios side by side is the most reliable way to understand how sensitive the result is to each assumption.
How should I interpret Minimum Variance Hedge Ratio Calculator results?
Minimum variance hedge ratio minimizes the variance of the hedged position using spot and futures volatilities and their correlation.
What are common input mistakes with Minimum Variance Hedge Ratio Calculator?
Stress test with conservative and optimistic inputs before acting. Document assumptions when sharing outputs with colleagues or clients.
What are the limitations of Minimum Variance Hedge Ratio Calculator?
Volatilities should use consistent units and horizon. Contract size is notional per futures contract.
Related Tools
Pair with Portfolio Beta and Asset Correlation Matrix on portfolios.tools when designing multi asset hedges.