Check out our latest webinar on Divergence hosted by our CEO, Juán Colón

Investor divergence is the difference between the return of your investment in a DARWIN and the notional return of this DARWIN. The notional return is a theoretical scenario in which investors replicate trades always at exactly the same price as the trader whose trades they are replicating.

It is expressed as a percentage and you can see it in your portfolio. You can see it in the general overview of your current investments and also for each of your open and closed investments.

A divergence of 0.39 % means that the return of your investment in this DARWIN is 0.39 % higher than the notional return of the DARWIN since you invested in it.

You can calculate the notional return of the DARWIN dividing the DARWIN's current quote by the average quote at which you bought the DARWIN. The difference between this return and your actual return is your investor divergence.

Let's see what exactly causes investor divergence.

Investor divergence has 3 causes:

  1. The first is a difference in base currencies between the DARWIN and the investor. When the investor's Wallet currency is different from the DARWIN's base currency, changes to the value of one of these currencies while trades are open, will cause a small divergence between the return of the DARWIN and the return of the investor. More about divergence due to base currency
  2. The second cause of divergence is latency. Investor trades get replicated necessarily several milliseconds later than the trader's trades. In those milliseconds, sometimes there is a small change in the price and investors get randomly either a little better or a little worse price than the traders they are replicating.
  3. The third and most important cause of divergence is investment volume. Trades for investors get replicated in block and when investors move a large volume, that is, have a large lot size, the best, top of book spreads are sometimes no longer available which gives rise to little price differences between the trader's trade and investors' replicated trades.

This third type of divergence, the one which is due to investment volume can be checked out on the DARWIN's page before investing in this DARWIN. The divergence you can see here indicates the estimated monthly difference between the notional return of this DARWIN and your investment in this DARWIN should you invest in it today. If this divergence is negative, your return will be lower than the return of the DARWIN. If it is positive, your return will be higher than the return of the DARWIN. 

More about divergence due to investment volume

Check out the video (closed-captions-only, no narration)

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