Pls make it clear!!!

Hedge funds are complex, risky investment vehicles. Other funds, such as most equity mutual funds, have straightforward investment strategies. By contrast, equity-oriented hedge funds may engage in various trading practices and investment strategies. They may be short funds, long-short funds or market neutral funds. And equity-oriented hedge funds are only a small sliver of the hedge fund universe. Thus, assessing the risk of hedge funds is a challenge

Investopedia says -

A ratio comparing the value of a position protected via a hedge with the size of the entire position itself.

A ratio comparing the value of futures contracts purchased or sold to the value of the cash commodity being hedged.  

Say you are holding $10,000 in foreign equity, which exposes you to currency risk. If you hedge $5,000 worth of the equity with a currency position, your hedge ratio is 0.5 (50 / 100). This means that 50% of your equity position is sheltered from exchange rate risk. 
 
According to me, the hedge ratio is the proportion of the hedge position to the total position. For example, if u have a portfolio of 40 crore rs, and u sell baskets of index futures to the tune of 10 crores only, then that means you have hedge only 25% of your total portfolio against the downside risk.

In simple words Hedging means...Security against contingency......

means if u hv one call option thyn to hedge ur position u will take put option which will due on same date on which call opton is due....

i hope this is enough to understand the funda of HEDGE...