Remember the Darwinex Correlation test? This feature tracks the correlation between different DARWINS & so you diversify your portfolio’s risk.
Also, as you may recall, the correlation measure determines a DARWIN’s eligibility for DarwinIA’s prizes (out of two highly correlated DARWINS, only the highest level & D-Score DARWIN is DarwinIA eligible).
Many providers have complained that the correlation threshold was too restrictive. Further, the count of active listed DARWINS keeps growing, which compounds the risk of the excess-correlation trigger kicking in!
With this in mind, we’re relaxing the DarwinIA eligibility criteria when it comes to correlation:
1. New (less restrictive) Correlation Thresholds
Starting today, the new, less restrictive DarwinIA correlation criteria are.
- If a Provider lists 2 DARWINS with a correlation higher than 0.5, only the one with the highest level & highest D-Score is eligible for DarwinIA.
- If 2 independent Providers list DARWINS with positive correlation higher than 0.8, only the one with the highest level & highest D-Score is DarwinIA eligible.
This significantly reduces the number of DARWINS being left out due to correlation!
2. New Divergence Threshold
With the growing DarwinIA capital allocation and with several DARWINs gaining Assets under Management at speed, the time has come to activate a max. allowable divergence threshold to enter DarwinIA.
We’re activating the lock-out as we’re experiencing a (much) higher than theoretically reasonable divergence with our DarwinIA investments. High divergence usually owes to low liquidity when some DARWINS trade during illiquid market conditions – or when providers market strategies / signals to venues other than Darwinex. In some (rare) instances, divergence has spiralled out of control to both Darwinex & investors detriment.
This is why, going forward: DARWINS with negative divergence ≤ – 1% won’t be DarwinIA eligible.
The DarwinIA lock-out mirrors the DARWIN lock-out methodology announced a couple of months ago. As you may recall, DARWINS with a negative divergence below – 1% were supposed to get closed to new investments.
You may be asking yourself… how come some DARWINS already reached the lock-out divergence level but have not been closed to new investment yet? The reason is simple: we decided against closing them because this would hinder a major improvement for investors that we are working on (sorry, we can’t tell just yet!).
For the time being, instead of closing DARWINS with high divergences, we’ll stop allocating DarwinIA prizes to them. Also, if you are planning to invest in a given DARWIN, review its divergence as part of our due diligence!
If your DARWIN is not eligible for DarwinIA due to negative divergence, feel free to reach out to firstname.lastname@example.org: nothing pleases us more than helping you profitably grow your assets under management – divergence hurts us much as it hurts you!