Financial Calculators

Hedge Ratio Calculator For Investments

This calculator will help you determine the percentage of your investment portfolio that has been hedged against investment risk.

Hedge fund ratio calculator

$
$
%
made with ❤️ by

Table of contents

What is a "hedge ratio"? Hedge ratio definition
How do I calculate the hedge rate? Hedge ratio formula
Hedge ratio calculator in practice. What are the benefits of the hedge ratio?
Can the hedge ratio be negative?
What is a hedge?
What is a good hedge rate?
What is exposure?
How do you find the hedge ratio?

What is a "hedge ratio"? Hedge ratio definition

The hedge ratio can be used to optimize a portfolio. The ratio of the portfolio's hedged value to total portfolio exposure is called the hedge ratio. This ratio is used to calculate how much of the portfolio's value is being hedged. It is therefore immune to lose.
The higher the hedge rate, the lower the proportion of portfolio value that is hedging. This means that a larger percentage of the portfolio is protected against potential losses. This does NOT mean that a portfolio with a higher hedge ratio will be more protected from potential losses. This is because a portfolio with a high hedge ratio loses some upside potential. You need to balance how much of your portfolio can be hedged and how little you can keep un-hedged.

How do I calculate the hedge rate? Hedge ratio formula

Let's look at the Portfolio Alpha for Company Alpha as an example of how to calculate the hedge ratio.
  • Company: Alpha
  • Portfolio: Portfolio Alpha
  • Total exposure $1,000,000 
  • Hedge position 375,000 
  • The following steps are required to calculate the hedge ratio:
  • Determine the total exposure
  • The first step is to determine the total exposure. Total Exposure The amount of money invested in a market.
    In our example, the total value is $1,000,000.
  • Determine the amount of the hedge position
  • The Hedge Position represents the amount of investment value that is immune to investment risk.
    3775,000 is the hedge.
  • Calculate hedge ratio
  • The last step is to calculate your hedge ratio. This formula can be used to calculate the hedge ratio:
    hedge ratio = hedge position / total exposure
    This example shows the investment ratio. It is $375,000 / $1,000,000 = 37.5%.
    You can also use the hedge ratio calculator to get the exact result right away.

    Hedge ratio calculator in practice. What are the benefits of the hedge ratio?

    We've covered the definition of hedge ratios and how they are calculated. Now let's talk about the benefits and drawbacks of using this metric.
  • First, let's discuss the advantages of the hedge ratio in practice. The hedge ratio can be used to guide portfolio optimization. Additionally, the Hedge Ratio formula is simple to use.
  • There are some downsides to the hedge ratio. A portion of portfolio exposure could be easily hedged in the market. Additionally, different investments have different optimal portfolio hedge ratios so it may be difficult to optimize the portfolio solely using this metric.
  • Can the hedge ratio be negative?

    no. Because the hedge ratio is positive because it combines the total exposure with the hedge position, it can't be negative.

    What is a hedge?

    Hedging is a method of managing risk. The party removes the potential for huge losses but reduces some of the potential profits. Hedging is typically done by commodity producers, such as crude oil firms.

    What is a good hedge rate?

    Because of the differences between investments, there is no one best hedge ratio. This is because different investments are subject to different levels of volatility. Aside from the volatility, investors may also have different tolerances for risk.

    What is exposure?

    Exposure refers to the amount that an investor could lose. This refers to the total amount an investor invests in the market. Technically, any investment value can reach zero.

    How do you find the hedge ratio?

    There are 3 steps to calculate the hedge ratio.
  • Calculate total exposure.
  • Determine what hedge position is worth.
  • Divide your hedge position by your total exposure to calculate the hedge ratio
  • Parmis Kazemi
    Article author
    Parmis Kazemi
    Parmis is a content creator who has a passion for writing and creating new things. She is also highly interested in tech and enjoys learning new things.
    Hedge Ratio Calculator For Investments English
    Published: Fri Jun 10 2022
    In category Financial calculators
    Add Hedge Ratio Calculator For Investments to your own website

    Other financial calculators

    Monthly Salary To Hourly Salary Calculator (pay Calculator)

    Calculate what you earn per hour easily with our calculator! You also learn the important differences between hourly and monthly salary payments!

    Pay Raise Calculator

    Calculate your new salary after pay raise easily with our online pay raise calculator!

    Consumer Surplus Calculator (consumer Surplus Formula)

    Calculate instantly consumer surplus with our online economic calculator!

    Salary Calculator

    The Salary Calculator converts salary amounts into their equivalent values based upon payment frequency.

    Car Loan Calculator

    This is a free calculator that calculates the monthly loan payment of an auto loan. Works with new and used cars!

    Discount Calculator

    Using this online calculator, you can figure out the final price after applying any discounts.

    Cryptocurrency Profit Calculator

    This calculator helps you to see how much money and profit you have made from your investments.

    Ethereum (ETH) Profit Calculator

    Calculate the profits of your Ethereum investments easily with this free investment calculator.

    Dogecoin (DOGE) Profit Calculator

    Calculate the profits of your Dogecoin investments easily with this free investment calculator.

    Bitcoin (BTC) Profit Calculator

    Calculate your investment profits of Bitcoin easily with this free investment calculator.

    Return On Equity Calculator

    This ROE calculator allows you to quickly calculate ROE (return-on-equity) based upon the net income generated as well as the total equity of the company/project.

    Mortgage Calculator

    This is a free tool that will calculate your monthly mortgage payment.

    Ripple (XRP) Profit Calculator

    Calculate the profits of your XRP investments with this free profit calculator.

    Bitcoin Cash (BCH) Profit Calculator

    Calculate the profits for your BCH investments easily with this free investment calculator.

    Litecoin (LTC) Profit Calculator

    Calculate the profits of your LTC investments easily with this free investment calculator.

    Binance Coin (BNB) Profit Calculator

    Calculate the profits of your BNB investments easily with this free investment calculator.

    Equivalent Annual Cost Calculator

    Use this free online tool to calculate the equivalent annual cost, which is a measure of the true cost of owning an asset over its lifetime.

    Annual Income Calculator

    This is an online tool is that calculates how much money you make in a year.

    Return On Investment (ROI) Calculator

    This is a calculator that helps you figure out how much money you will make from an investment.

    Car Depreciation Calculator

    This calculator calculates the cost of depreciation for your car. Estimate the car's value once it has been used.

    Interest Calculator

    Our interest calculator allows you to calculate the interest payments and final balances for not only fixed principal amounts but also periodic contributions.

    CAPM Calculator

    Use this CAPM calculator to explain the relationship between the expected return and the risk of security.

    Financial Markup Calculator

    The markup calculation calculator is a tool for businesses that calculates your sales price.

    Home Loan Calculator (EMI)

    This home loan calculator is free and will allow you to calculate your Home Loan EMI quickly.

    PPF (Public Provident Fund) Calculator

    This financial tool allows you to resolve your queries about the Public Provident Fund account.

    Mutual Funds Returns Calculator

    With this free tool you can calculate the return on investment on mutual funds!

    SIP (systematic Investment Plan) Calculator

    SIP calculators allow individuals to quickly calculate the potential returns of their mutual fund  investments made via SIP.

    CAGR Calculator (compond Annual Growth Rate)

    If you want to estimate the potential return from an investment, the CAGR calculator is the tool for you!

    Ponderal Index Calculator

    This ponderal Index Calculator will provide a more accurate measurement than Body Mass Index.

    Cap Rate Calculator

    The cap rate, also known as the capitalization rate calculator is a tool that anyone who is interested in real property can use.

    Stock Average Calculator (cost Basis)

    This stock average calculator will allow you to calculate the stock price or the average price at which you purchased your stocks.

    Investment Calculator

    You can use the Investment Calculator to calculate a particular parameter for your investment plan. The tabs indicate the parameter to be calculated. To calculate the return rate required to reach a certain investment goal using particular inputs click on the Return Rate tab.

    Reverse Stock Split Calculator

    This remarkable tool will calculate a stock's new value after a reverse stock splitting.

    Electricity Cost Calculator

    The electricity cost calculator allows consumers to estimate their annual electricity costs in an easy-to-use way.

    Common Rent Split Calculator

    This calculator will quickly and efficiently calculate the fair rental amount for each member of your rental unit.

    Commission Calculator

    This online calculator will calculate the percentage-based remuneration.

    Future Value Calculator

    The Future Value Calculator is a smart tool that will quickly calculate the value of any investment at any given moment in the future.

    Startup Valuation Calculator

    The post and pre-money valuation calculator simplifies the math so you can focus on more important tasks when you're negotiating startup valuation.

    Sinking Fund Calculator

    The sinking fund calculator helps you to determine how much you need to put aside in order for you to achieve your goal within the specified time.

    Recurring Deposit (RD) Calculator

    The RD Calculator (recurring deposit) can help you determine the maturity value for your RD Investment Account if it grows at a set interest rate and over a certain amount of time.

    Lease Calculator

    Our lease calculator will help you to determine the monthly, and total payment for a lease.

    Debt To Income Ratio Calculator

    The debt to income calculator, or DTI calculator for short, is an invaluable tool for anyone who has taken out any type of loan. This calculator will show you how much debt you have and whether you can afford another loan.

    Payback Period Calculator

    The payback period calculator allows you to estimate how long it will take to make a profit on an initial investment.

    Earnings Per Share (EPS) Calculator

    This tool will guide you in calculating your earnings per share. It also provides you with an exact formula for calculating your EPS.

    Moment Of Inertia Calculator

    The moment-of-inertia calculator can be used to assist you if you are having trouble determining the second instant of area for any common shape (such as a round or a hexagon).

    Future Value Of Annuity Calculator

    The Future Value of Annuity Calculator can be used to find the future value of a set of equal cash flows at a particular date.

    Annual Percentage Yield

    The APY Calculator can be used to calculate how much interest you will earn on an investment made over the course of a year.

    Margin Calculator

    If you're looking to maximize your margins, this calculator will be your best friend. You can calculate the revenue from an item if you know its price and your preferred profit margin percentage.

    Crore To Lakh Converter

    The crore to lakh converter is a handy tool that allows you to convert any number into crores or lakhs.

    Boat Loan Calculator

    This tool will assist you in estimating monthly payments as well as calculating the total price for your dream boat financing.

    Bond Price Calculator

    We aim to help you calculate the bond prices issued by a government or a corporation with this bond price calculator.

    Time And A Half Calculator

    With our time and a half calculator, you can easily find the overtime rates for time and a half, double pay, and triple pay.

    FIRE Calculator - Calculate Early Retirement

    FIRE Calculator — Financial Independence, Retire Early

    Percent Yield Calculator

    The percent-yield calculator will assist you in understanding how percent yield and also show you the percentage yield formula, as well as the definition.

    Diversification Calculator

    Credit Card Payment Calculator

    Calculate your credit card payments easily with our free tool

    Calculate Your Current Ratio Of Assets To Liabilities

    Calculate your current ratio for finance and business!

    Credit Score Calculator

    Try our free and easy to use credit score calculator. Use it to estimate what your FICO credit score might be.

    Dividend Payout Ratio Calculator

    Common Equity Tier 1 (CET1)

    Cost Of Living Calculator To Understand Your Monthly Budget!

    Figure out if you will save or owe money each month with our monthly budget calculator

    Calculate How Much Capital Gains Tax You Will Owe With This Simple Calculator

    Calculate how much capital gains tax you will owe with this simple calculator

    Calculate The Coefficient Of Variation

    Calculate the coefficient of variation to compare two sets of data with different units of measurement