# Correlation Matrix Hedging AI Agent Connect

> Calculate precise hedge ratios and risk profiles for correlated prediction markets.

## Overview
- **Category:** finance
- **Price:** Free
- **Endpoint:** https://edge.vinkius.com/vk_preview_mcRTAexNhdiwy59SK1ItBJMT74BXzVDmfUBpVEqf/ai-agent-connect
- **Tags:** hedging, beta, correlation, risk, polymarket

## Description

This MCP server provides deterministic tools for managing risk in correlated prediction market events. By using `calculate_hedge_ratio`, you can determine the exact beta needed to neutralize exposure between two assets. You can then use `analyze_residual_risk` to quantify the remaining idiosyncratic volatility, or `calculate_trade_economics` to evaluate the total cost, net expected value, and breakeven thresholds for your hedging strategy.

## Tools

### analyze_residual_risk
Calculate the remaining idiosyncratic risk after applying a hedge

### calculate_hedge_ratio
Calculate the hedge ratio (beta) and amount to neutralize exposure to a primary market

### calculate_trade_economics
Calculate the total cost, net expected value, and breakeven threshold for a hedged trade

## Prompt Examples

**Prompt:** 
```
How much of ETH should I short to hedge a long position in BTC?
```

**Response:** 
```
To neutralize your BTC exposure, you should short 0.85 units of ETH based on the current correlation and variance.
```

**Prompt:** 
```
What is the remaining risk if I hedge my Polymarket position?
```

**Response:** 
```
The residual variance for this hedged position is 0.042, representing an unhedged risk of 12%.
```

**Prompt:** 
```
What is the breakeven for my hedging strategy?
```

**Response:** 
```
The breakeven threshold for this trade is a 2.5% move in the idiosyncratic component of the primary market.
```

## Frequently Asked Questions

**How do I calculate the amount of a hedge position?**
Use the `calculate_hedge_ratio` tool. It returns the specific `hedgeAmount` required to balance your primary position based on historical covariance and variance.

**What is idiosyncratic risk?**
It is the residual risk that remains after you have neutralized the correlated component of your position. You can measure this using `analyze_residual_risk`.

**Can I estimate the profitability of my hedge?**
Yes, the `calculate_trade_economics` tool provides the net expected value and the breakeven threshold, accounting for fees and bid-ask spreads.