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Pair & Hedge Calculator

Compare a stock with the hedge you selected and calculate a beta-neutral ratio.

Comes with: Professional Trading Masterclass: Stocks tools

Using the Pair & Hedge Calculator

Stocks tools: PTM

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Illustrative example, not current market data

This is a preview, so every field and button below is switched off and the figures stay as they are. They all work once your access is verified.

Example

Illustrative example, not current market data.

The pair

Risk choice

How do you want to set your risk?

KO vs PEP

250 overlapping sessions · daily EOD data

Principal result

Hedge ratio (OLS log-price)

0.42

Correlation (daily returns)
0.71
Spread z-score
1.34
Beta KO on PEP
0.83
KO beta vs SPY
0.55
PEP beta vs SPY
0.61

The spread is 1.34 standard deviations above its own mean.

Spread

ln(KO) − 0.42·ln(PEP)
2024-08-012025-05-01
spread mean 1σ above mean · Leg A KO 1σ below mean · Leg B PEP latest

Beta-neutral position size

Leg A: KO
235 sh

≈ 14,706 notional · @ 62.40

Leg B: PEP
36 sh

≈ 6,176 notional · @ 168.90

Money on each leg

Leg A: KO14,664
Leg B: PEP6,080

Notional actually deployed at these whole-share counts, on one shared scale. Beta-neutral does not mean equal money: the hedge ratio decides how the two sides are split.

Risk set
500
Risk at this size
499
Hedge ratio used
0.42

These are share counts that keep the pair beta-neutral at your risk and sigma stop. The calculation describes the historical relationship between the two securities. It does not decide whether the pair makes investment sense.

What this tool does

Compare a stock with the hedge you selected, then size both legs to a beta-neutral ratio so each side carries the exposure you intend.

The full instructions, and the definition and limit of every number it produces, open with the tool itself.

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