# R squared

From ACT Wiki

*Regression analysis and hedge effectiveness*.

*R squared* is a measure of the goodness of fit between two variables.

In hedge effectiveness testing, it measures how closely the value of the hedging instrument tracks the value of the underlying exposure being hedged.

An *R squared* parameter equal to or greater than 0.80 is generally considered effective.

Other metrics for hedge effectiveness include Slope.

R squared is also sometimes written *R-squared*, with a hyphen.