“Unlike more traditional products, the Reality Shares DIVS ETF (NYSE Arca: DIVY) isolates and invests in the dividend growth rate of large cap U.S. companies – not the appreciation of the underlying stock price – and thus, shields investors from stock volatility,” Ervin added.
DIVY is not so much a stock alternative as it is a bond alternative. Through its targeted dividend growth strategy, DIVY may produce low-volatility and low market correlation that helps stabilize an investment portfolio. For instance, the ETF has shown a -0.09 correlation to the Barclays U.S. Aggregate Bond Index, a 0.40 correlation to the HFRX Global Hedge Fund Index and a 0.29 correlation to the S&P 500 Index, reflecting an almost neutral correlation to U.S. bonds and slight positive correlation to U.S. stocks.
Furthermore, Reality Shares DIVS ETF has also exhibited smaller swings in a time of heightened volatility and even outperformed the broader U.S. markets this year. Year-to-date, DIVY rose 3.4%, compared to the 0.1% dip in the S&P 500. The Reality Shares DIVS ETF portfolio has also produced historically lower volatility than the S&P 500. According to Bloomberg data from the end of 2014 through March 2018, DIVY’s net asset value has shown a standard deviation of 4.2%, compared to the S&P 500’s 12.5%.
For more information on alternative investments, visit our alternatives category.