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Suppose that the standard deviation of monthly changes in the price of commodity A is 2.58....

Suppose that the standard deviation of monthly changes in the price of commodity A is 2.58. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is 3.15. The correlation between the futures price and the commodity price is 0.86. Value of your commodity position is $2.8 million, and the value of a futures contract is $40,000. What strategy should you follow to hedge your exposure?  

Answer: Short 49 contracts. You are long in the commodity. You need to short to hedge.

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