The ratio is part of the strategy, not a formatting choice. Two charts that show the same markets with different contract weights represent different exposures and different P&L.
Start with contract specifications
Record each price unit, contract size, currency and tick value. A subtraction of cents per bushel from dollars per barrel has no physical meaning. Convert each quote to a shared unit when a natural physical conversion exists, or express each leg as USD per contract and label the basket as such.
Use an explicit weighted basket
For quantities qA and qB, a long-A/short-B basket is qA × contract multiplier A × price A − qB × contract multiplier B × price B, after currency and quote-unit conversion. Its move between two dates is the exit basket value minus the entry basket value. The sign of a short-A/long-B position is reversed.
Equal contracts do not always mean equal risk
A 1:1 count can match physical size while leaving unequal volatility or different dollar sensitivity. Some exchange-listed intercommodity strategies specify their own ratios. Decide whether the goal is physical-unit matching, dollar-notional balance, statistical hedge ratio or an exchange-defined combination; state that choice on the chart.
Check both the path and the endpoint
A favorable entry-to-exit difference says nothing about the interim loss or cash needed to maintain the position. Recalculate the weighted basket for each historical date with available prices from all legs. Avoid silently replacing missing observations with zeros or carrying stale prices across an inactive contract.
Test the exact dated structure
Inspect the leg months, historical years and selected window before drawing a conclusion from an average curve.
Open Futures Spread Analyzer →Frequently asked questions
Can I just subtract two displayed futures prices?
Only when the units and the intended exposure make that subtraction meaningful and the sign convention is stated.
Does a hedge ratio stay constant?
Not necessarily. Volatility, correlations and exchange strategy definitions can change; document the ratio used for each study.
Exchange references
Use the exchange material for product definitions and confirm current specifications, listed combinations and margins with your broker.
Continue the Intercommodity Spreads series
Also read Futures Spread Trading and Calendar Spread Trading.
Bring the formula to the chart
Compare a defined structure across historical years and review every leg before making a decision.
Explore the Analyzer →Educational material only, not investment advice. Examples are illustrative. Historical results do not guarantee future performance. Trading costs and slippage are excluded unless explicitly stated.