Risk Management

Correlation Hedge Ratio Calculator

Sizing a hedge off correlation and relative volatility (the minimum-variance hedge ratio, h* = ρ × σ_A/σ_B) gives a more accurate offset than a simple 1:1 hedge. Enter your position size, the volatility of your position and hedge instrument (ATR% or standard deviation both work, as long as they're the same measure), and the correlation between them.

Position Size (units or $)

Volatility of Position Asset (%)

Volatility of Hedge Asset (%)

Correlation (-1 to 1)

Hedge ratio (h*) ···

Hedge position size ···

Educational tool only, not financial advice. This is a minimum-variance hedge estimate based on historical volatility and correlation, both of which can change quickly. Re-check the hedge regularly.

Built by Jason Parker, founder of Trading Ranges.