How to Calculate Odds Ratio

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What is ‘Odds Ratio’?

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In scientific terms, the odds ratio is the probability of two events, A and B, in relation to one another. It is the probability that Event A will occur without the presence of Event B, and also with the presence of Event B.

Confused yet? Odds Ratio is also used in the gambling industry, but it can be a bit easier to understand if you know how to read odds. This guide will help explain how to read the odds ratio and will also give you a few examples of how to calculate the odds ratio.

How to Read Odds Ratio

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Learning how to interpret odds ratio might seem like a daunting task, but it is not that challenging after you get the hang of it. When you are reading the odds ratio, you are simply determining the probability of a certain outcome to occur.

In sports betting, sportsbooks make this process easier by making it obvious which side is the favorite and which side is the underdog in a certain matchup. The favorite will always have a (-) in front of their lines, while the underdog will be designated with a (+).

The first step in reading the odds ratio is to understand probability, especially in relation to how probable a certain outcome is to occur. Flipping a coin would have a probability that the coin will land on heads and tails 50 percent of the time.

In betting, the higher the odds means that there is a higher probability of that outcome occurring. In other words, the favorite in a game of matchup has a higher probability of winning.

You won’t want to try and focus on looking at the odds ratio formula, but taking a quick glance at the odds will help you read this. The more practice and understanding you have with reading odds, the better you will be at understanding the odds ratio.

How to Calculate Odds Ratio

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Calculating the odds ratio is usually done for you in the gambling industry, but you can also use a simple formula to do this yourself. Using the odds that are available to you, you can simply plug those numbers into a formula to find out the odds ratio.

The simple formula is: 1 divided by the odds + 1. This could look like 1/ (7+1)= .125.

This odds ratio is much easier when using fractional odds, but American odds can be converted to fractional odds pretty quickly. Here is one more example to help explain how to calculate odds ratio.

Let’s say that the Kansas City Chiefs are +300 to win the Super Bowl. Using fractional odds, the Chiefs would then be listed at 3/1.

So plugging those odds into the formula, it would be: 1/ (3+1) = .25.

This means that the Chiefs have a 25 chance to win the Super Bowl using the odds ratio. As the odds change, the odds ratio also changes, but the formula remains the same.

FAQ

What Does Odds Ratio Mean?

The odds ratio is the probability of a certain outcome occurring, and then you are able to figure out how much money can be won with that bet. In the simplest terms, the probability of a certain outcome is divided by the probability of another outcome.

This is how sportsbooks set betting odds, and they pay close attention to the odds ratio. Sports bettors can use this same formula to determine the potential winnings for making a wager.

How Do You Find Odds Ratio?

The betting odds will help you find the odds ratio using a simple formula. This can be best explained by using fractional odds as opposed to decimal odds.

For example, fractional odds listed at 4/1 or +400 in American odds mean that you have a 1 in 5 chance of winning this bet. The formula for finding this is:

1 / ( 4 + 1 ) = .20

A 20 percent chance to win would translate to 1 in 5.

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