Connectedness between healthcare cryptocurrencies and major asset classes: Implications for hedging and investments strategies

Ritesh Patel, Mariya Gubareva, Muhammad Zubair Chishti () and Tamara Teplova

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: This paper studies dynamic connectedness between four prominent healthcare cryptocurrencies, namely MediBloc, MediShares, Medicalchain, and Dentacoin, and bond, equity, and commodity markets along with USD and Bitcoin. The daily data span from February 2018 to April 2023. We applied the quantile VAR method and the wavelet quantile correlation approach to measure the connectedness. The quantile VAR method reveals a strengthening interrelation among the assets during COVID-19 and Russia-Ukraine military conflict, while the wavelet quantile correlation highlights the existing diversification opportunities. To test portfolio performance, we resort to minimum variance portfolio, minimum correlation portfolio and the recently developed minimum connectedness portfolio techniques. The minimum variance portfolio is best performing portfolio with highest Sharpe ratio. In addition, considering the minimum connectedness and minimum correlation portfolios, the exposure to healthcare cryptocurrencies also improves portfolio diversification. Based on the hedging effectiveness, we show that the investment in the healthcare cryptocurrencies reduces the volatility for all the selected portfolios though currently in a limited degree. However, the investors are advised to regularly monitor their asset allocation as, with the passage of time, the strength of hedging attributes may change. Our study provides important implications for policymakers and the portfolio managers.

Keywords: Healthcare cryptocurrencies; Equity; Bond; Bitcoin; Oil; Gold; Portfolio diversification; Connectedness; Hedging effectiveness; Quantile vector autoregression; Wavelet quantile correlation (search for similar items in EconPapers)
JEL-codes: C51 C58 G11 G12 G15 I11 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001133

DOI: 10.1016/j.irfa.2024.103181

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