LEARN/THE REALISM ENVELOPE

The realism envelope

There is no realism score. There is a panel of fourteen measurements, a horizon they hold to, and five named gaps.

14 statistics in band at one year

252 trading days certified

30 seeds behind the panel

5 named gaps

What the fourteen measure

Each row is one habit of a real market. The bar is the range that real equities hold. The dot is what the shipped preset measured at 252 days. A dot inside the bar means the model got that habit correct.

annualised_vol_pct how much prices move in a year 28.3103

excess_kurtosis how fat the tails are 10.0043

return_acf1 does yesterday predict today 0.0114

abs_return_acf1 does a wild day follow a wild day 0.0769

abs_return_acf5 the same, one week apart 0.0305

abs_return_acf20 the same, one month apart 0.0096

cross_sectional_corr how much names move together 0.2616

volume_abs_return_corr do big moves come with volume 0.5108

leverage_effect do falls raise volatility -0.0258

volume_change_acf1 does volume mean-revert -0.2794

corr_asymmetry do names couple more when falling -0.0018

corr_asymmetry_lagged the same, one day later -0.0327

sector_excess_corr do industries move together 0.2081

corr_persistence_acf1 does correlation stay high after a panic 0.1771

band floor
band ceiling

All fourteen dots sit inside their bands. That is a market with the correct volatility, the correct tails and the correct co-movement. Industries move together more than strangers do. Correlation stays high after a panic, volume behaves, and the model produces its own volatility episodes.

Why the horizon stops at 252 days

The count is not the reason

At 504 days pt-v14 also holds all fourteen, against bands that were re-derived for that window. pt-v3 held seven there. pt-v10 held thirteen.

Two things keep the certification at one year. Annualised volatility reads 33.89 against a band that ends at 34.0, which is thin headroom. And certified means measured at 252 days on thirty seeds, which is what this module measures.

Nothing runs away

Annualised volatility, measured year by year over ten years on twenty seeds:

31.5 35.6 30.2 33.5 33.0 33.1 31.3 32.4 32.4 31.6

Flat, with the year-to-year variation that a real market has. At 2520 days the panel holds ten of the fourteen, graded against the 504-day bands, which are the wrong ruler for a ten-year window.

The five gaps

Each gap names what it forbids. tf.envelope.check() refuses a question that falls outside one, so this is a function rather than a paragraph.

horizon the certified horizon is 252 days

FORBIDS multi-year backtests, and anything keyed on volatility dynamics beyond one year

MEASURED At 504 days pt-v14 holds all fourteen against re-derived bands. At 2520 days it holds ten of fourteen against the 504-day bands.

abs_return_acf1 abs_return_acf5 return_acf1 excess_kurtosis

decay-shape volatility memory decays exponentially, not hyperbolically

FORBIDS strategies whose edge depends on volatility memory beyond about lag 20 -- vol targeting and risk parity on a one-month or longer estimate

MEASURED The log-log slope over lags 1 to 20 reads -0.953 against a real -0.436. The curve turns negative by lag 30, where real markets stay weakly positive to lag 60.

abs_return_acf20

scenario-magnitude a scenario's size is right on average and unreliable in one run

FORBIDS sizing a scenario's impact rather than detecting it

MEASURED The steady-state lever reads 6.04x against a real 6.16x. Residual dispersion over the driven window runs 1.565 times real, which is the defect.

no single statistic carries this one

macro-range the endogenous macro state cannot reach its own crisis regimes

FORBIDS studying inflation regimes or policy crises from the endogenous economy alone

MEASURED Endogenous inflation peaks at 4.0% on every seed over five years. Real US CPI peaked at 9.0% in June 2022.

no single statistic carries this one

roster-concentration a concentrated roster holds at one year and comes apart at two

FORBIDS inheriting this envelope for a sector-concentrated roster BEYOND one year -- at the certified horizon it now transfers

MEASURED At 252 days every roster shape holds all fourteen. At 504 days an S&P-like roster holds thirteen and a technology-heavy roster holds eleven.

cross_sectional_corr annualised_vol_pct corr_persistence_acf1

What a result may claim

You can say this

The strategy behaved this way in a market that reproduces the fourteen habits of real equities over a trading year. Here is the manifest, so you can run it again.

You can not say this

The strategy will earn this in a real market. The price process comes from a known model, so a strategy that fits the structure of that model looks excellent and teaches you nothing.