📊 Optimal Hedge Ratio Calculator
Calculate the minimum-variance optimal hedge ratio for a futures hedge, using correlation and volatility of the spot and futures positions.
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What is the optimal hedge ratio?
The optimal (minimum-variance) hedge ratio determines the ideal proportion of futures contracts to use when hedging a spot position, in order to minimize the variance of the combined hedged position.
The formula
h* = ρ × (σspot / σfutures), where ρ is the correlation between spot and futures price changes, and σ represents their respective standard deviations.
This calculator is for general risk-management education, not investment advice.
Last reviewed August 2026