Hedging calculation | Forex Factory

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Hedging calculation

  • #1
  • First Post: Jun 27, 2010 6:43pm Jun 27, 2010 6:43pm
Hello,
I'm studying hedging and I need some help from a person who understand the numbers.
I want to do this:

Long EURUSD
Long USDCHF
Short EURCHF

I'm trying to be stable no matter where EURUSD and USDCHF go.

The problem is that 1 lot is different in each pair.
I think the difference was 1:1.6 for EUR and CHF

Does someone know how much of each one must I buy/sell to make this work?

Thanks in advance.
  • #2
  • Jun 27, 2010 7:13pm Jun 27, 2010 7:13pm
Quoting Quantum4x
Hello,

I'm trying to be stable no matter where EURUSD and USDCHF go.
Then don't trade them.
  • #3
  • Jun 27, 2010 9:41pm Jun 27, 2010 9:41pm
Quoting Lonestar
Then don't trade them.
I don't understand.
Are you trying to help?
  • #4
  • Jun 27, 2010 10:19pm Jun 27, 2010 10:19pm
What are you trying to accomplish? A full hedge? If that's the case then for every 1000 units of e/u you have long you would need a 1000 units for e/c short and 1240 (give or take a couple units) of u/c long. Are you trying to create a synthetic?
  • #5
  • Jun 27, 2010 11:37pm Jun 27, 2010 11:37pm
Trying to understand correlation.
I've spent several days just trying to know if I can see some way of trading a "chain" (where A is below B and I go long on A, and then A is above B and I close the trade).
So I'm trying to fully understand the theory so I don't waste any time trying to figure it out visually.
  • #6
  • Jun 28, 2010 12:19am Jun 28, 2010 12:19am
If you're talking about trying to exploit a pricing inefficiency in a three pair hedge, don't waste your time. If you're trying to do a "pairs trade", like in stocks, and trade two correlated pairs when one is outperforming and the other is under performing with the assumption that they'll meet up at some point, don't waste your time. You'll just be creating a synthetic third pair. If you trying to do something completely different, good luck to you.
  • #7
  • Last Post: Jun 28, 2010 7:21am Jun 28, 2010 7:21am
Quoting Lonestar
If you're talking about trying to exploit a pricing inefficiency in a three pair hedge, don't waste your time. If you're trying to do a "pairs trade", like in stocks, and trade two correlated pairs when one is outperforming and the other is under performing with the assumption that they'll meet up at some point, don't waste your time. You'll just be creating a synthetic third pair. If you trying to do something completely different, good luck to you.
I've been thinking about playing with synthetics. Have you done something in this area?

I want to create baskets which maximize certain patterns (more towards quant style analysis). For example EUR/USD - S&P 500 should generate something more range-bound than it's constituents.
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