FX Neutral✓ Mathematical
◆ The PatternNeutralize FX exposure in global portfolios
International allocations introduce currency risk. A US investor buying European equities profits (or loses) from EUR/USD moves on top of the equity return.
Runhedged ≈ Rlocal + RFX
Forward contracts lock future exchange rates. Full hedging eliminates FX variance but costs the interest-rate differential (covered interest parity). Partial hedging (50 %) is a common compromise.
// Interactive — hedge ratio and FX exposure
Hedge ratio %
| Approach | Cost | Residual FX |
|---|---|---|
| Unhedged | None | Full |
| 50 % hedged | Moderate | Half |
| Fully hedged | Interest diff | Near zero |
Pattern bridge: Interest-rate fundamentals connect to Indicators.