How is the hedge ratio measured?

By least squares on the daily block averages of the location and the hub over the days both have prices: the MWh of the hub that would have moved most closely with one MWh at the location.

What does risk left mean?

The daily standard deviation a hedge at that ratio would have left, as a share of the location's own. A lower share means a closer hedge.

Is the past fit a guarantee?

No. Congestion, new generation and transmission change how locations move together; the ranking describes the history you choose.

Which locations are covered?

Hubs, load zones and many nodes in your subscription whose day-ahead history EOX loads.

Tools › Best hedge

Best hedge for a power location

Find which liquid hub has tracked a node or zone most closely, with the hedge ratio and the risk a hedge at that ratio would have left.

What goes in, what comes out

Your choices

The market and the location to hedge: a hub, a load zone or a node EOX loads
On-peak, off-peak or around the clock
How much day-ahead history to measure, three to 36 months

The results, for every candidate hub

The hedge ratio: MWh of the hub per MWh at the location
R² and correlation of the daily block averages
The residual risk in $/MWh a day, and as a share of the location's own volatility
The basis against a one-for-one hedge: its average and its standard deviation
The candidates ranked from closest fit down

Each candidate is an EOX power curve in the same market, so the best fit is a hub you can mark, value and hedge on EOX curves.

Example

Rank	Hub	R²	Hedge ratio	Risk left	Basis average	Basis σ
1	HUB1	0.96	0.93	20%	−1.85	3.40
2	HUB2	0.91	0.88	30%	−3.10	5.25
3	HUB3	0.74	1.12	51%	2.40	9.80

Hub names are placeholders and values are illustrative.

Use it from

Python

from eoxlive import EOX
eox = EOX("YOUR_KEY")
eox.best_hedge("ISO1", "LOCATION1", block="on", history_months=12)["candidates"]   # ranked, as a DataFrame

REST

curl -H "X-API-Key: YOUR_KEY" \
  "https://api.eoxlive.com/v1/analytics/best-hedge?iso=ISO1&location=LOCATION1&block=on"

Or in the browser, on the Market analysis page under Valuation, signed in with your EOX account.

Questions

How is the hedge ratio measured?: By least squares on the daily block averages of the location and the hub over the days both have prices: the MWh of the hub that would have moved most closely with one MWh at the location.
What does risk left mean?: The daily standard deviation a hedge at that ratio would have left, as a share of the location's own. A lower share means a closer hedge.
Is the past fit a guarantee?: No. Congestion, new generation and transmission change how locations move together; the ranking describes the history you choose.
Which locations are covered?: Hubs, load zones and many nodes in your subscription whose day-ahead history EOX loads.

Included with your subscription. The tools use the curves, vols and correlations your subscription already covers, under the same entitlements, and are never charged for separately. Results are for information only; values shown on this page are illustrative.

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