The Importance of Bitcoin and Commodities as Investment Diversifiers in OPEC and Non-OPEC Countries

Abstract

The study aims to critically assess the safe-haven properties of Bitcoin and a diverse set of commodities in mitigating stock market risks during periods of extreme financial turbulence. Specifically, this research seeks to evaluate the effectiveness of these assets as hedging tools or diversifiers in the portfolios of both OPEC and non-OPEC countries, focusing on their behavior during the COVID-19 pandemic. We employ a wavelet coherence approach to analyze the dynamic relationships between the variables. Portfolio optimization is conducted using CVaR to assess the effectiveness of these assets as safe havens, hedges, or diversification tools in mitigating financial risks during periods of heightened market volatility. The diversification benefits of commodities and Bitcoin in OPEC and non-OPEC stock portfolios decrease over time as their co-movement with stock markets increases. During the COVID-19 period, BTC did not act as a safe haven. However, gold served as a hedge for non-OPEC countries. Using CVaR, we found that BTC provides stronger diversification benefits than commodities, followed by gold. We examine the safe-haven role of Bitcoin and various commodities, specifically within the context of both OPEC and non-OPEC countries. Our study offers a more comprehensive analysis of how BTC and commodities function as portfolio assets during financial stress, providing valuable insights for investors and policymakers.

1. Introduction

The COVID-19 pandemic has undeniably introduced unprecedented volatility in global financial markets, compelling investors to explore alternative assets as safe havens during economic turbulence. Bitcoin (BTC), often regarded as a digital hedge against traditional market volatility, has garnered significant attention in this context. Several academic studies (e.g., Corbet et al. 2020; Conlon and McGee 2020; Bouri et al. 2020; Agosto and Cafferata 2020; Huber and Sornette 2022; Náñez Alonso et al. 2024) have investigated BTC’s behavior under financial duress, particularly during the COVID-19 pandemic, framing it as a potential refuge for investors.

Despite this heightened interest, a critical gap persists in empirical research regarding the optimization of portfolios that include BTC alongside various commodities and traditional stock markets during global crises. The idiosyncratic nature of the COVID-19 pandemic, in contrast to the 2008 Global Financial Crisis (GFC), further amplifies the importance of addressing this gap. Harvey (2020) notes that the COVID-19 crisis has resulted in what he terms the “Great Compression”, a phenomenon distinct from the GFC’s impact on capital markets. Moreover, Zhang et al. (2020) emphasize that the pandemic’s unprecedented stock market volatility requires an updated framework for asset allocation strategies, particularly concerning alternative assets (Náñez Alonso et al. 2024) such as BTC and commodities.

While the allure of BTC as a hedge or safe haven during market stress has been widely speculated, the empirical evidence supporting this narrative is still underdeveloped. Many existing studies tend to generalize BTC’s safe-haven role without adequately considering the distinct economic environments and regulatory frameworks of different regions. This is particularly evident in OPEC countries, where BTC markets remain underdeveloped or informal. In countries such as Saudi Arabia and Kuwait, the lack of formalized cryptocurrency markets raises doubts about BTC’s viability as an investment tool in these economies. For instance, while BTC is gaining traction as a speculative asset globally, its role as a reliable hedging tool in these oil-dependent economies is questionable. The lack of institutional infrastructure to facilitate secure trading, combined with regulatory ambiguities, limits its accessibility and integration into traditional investment portfolios. Thus, overlooking the role of BTC in portfolio construction for OPEC nations represents a significant blind spot in the existing literature. As financial development and interest in BTC grow within these regions, understanding how BTC performs as a portfolio asset in both OPEC and non-OPEC countries becomes increasingly relevant for investors and policymakers.

This study, therefore, attempts to fill this void by examining the safe-haven characteristics of BTC and a wide range of commodities, including agricultural products, industrial metals, energy, and precious metals.

The goal is to determine whether these assets can mitigate stock market risks during extreme market conditions, particularly in the context of OPEC and non-OPEC countries. Thus, first, we examine the impact of commodities and Bitcoin (BTC) on stock markets, as market participants often believe there is a strong correlation between commodities (or BTC) and stock markets. In the second part, we assess whether commodities or BTC can help diversify OPEC and NON-OPEC stock portfolios by evaluating their potential for risk reduction and determining whether commodities or BTC function as a diversifier, hedge, or safe-haven assets. Specifically, an asset is classified as a diversifier if it is positively (but not perfectly) correlated with another asset or portfolio on average. An asset is considered a hedge if it is uncorrelated or negatively correlated with another asset or portfolio on average, with a strict hedge being strictly negatively correlated on average. An asset is referred to as a safe haven if it is uncorrelated or negatively correlated with another asset or portfolio during periods of market stress or turmoil (Baur and Lucey 2010). By focusing on the three largest oil-exporting countries with significant BTC usage, this research provides a nuanced perspective on how commodities and BTC interact within the portfolios of economies heavily reliant on oil exports. Additionally, we examine the relation between commodities and BTC in the stock market in OPEC and non-OPEC countries to provide a clear analysis of investors’ behavior in a turmoil period. OPEC countries are heavily reliant on oil exports, making their economies and stock markets more sensitive to fluctuations in oil prices (Banerjee et al. 2023; Khan et al. 2023). Non-OPEC countries, on the other hand, often have more diversified economies, which may result in different responses to shocks in commodity markets (Ziadat and Maghyereh 2024).

Crucially, the study adopts a sophisticated methodological framework, utilizing the wavelet approach to capture the dynamic dependencies between financial markets, BTC, and commodities. This allows for a more granular understanding of how these assets move in tandem or diverge under varying market conditions. Additionally, the use of Conditional Value at Risk (CVaR) for portfolio optimization is a particularly relevant choice in this context, as it is designed to capture extreme downside risks, which are characteristic of turbulent periods like the COVID-19 pandemic. CVaR’s ability to estimate expected losses makes it an invaluable tool for risk-averse investors seeking to minimize exposure to extreme market shocks.

The findings of this research will undoubtedly hold significant value for a wide range of stakeholders, including portfolio managers, institutional investors, and regulatory authorities. For portfolio managers and investors, the insights gained will offer a clearer understanding of how to construct resilient portfolios that incorporate BTC and commodities in a risk-optimized manner. For policymakers, especially in OPEC countries, this study can explain how emerging assets like BTC may play a role in stabilizing financial systems during future crises.

This research contributes to the literature in several unique ways: First, it examines the intersection of Bitcoin (BTC), commodities, and stock markets within the context of global economic instability, a timely and underexplored area. Second, it provides a comparative analysis of BTC, commodities, and stock market behaviors between OPEC and non-OPEC countries, offering insights into regional heterogeneity. Third, the study employs a wavelet approach to capture dynamic dependencies across markets, providing a nuanced understanding of how these assets co-move or diverge under varying conditions. Fourth, by incorporating Conditional Value at Risk (CVaR) for portfolio optimization, the research addresses extreme downside risks, particularly relevant during turbulent periods such as the COVID-19 pandemic. CVaR’s focus on estimating expected losses offers significant value for risk-averse investors.

The rest of the paper is structured as follows: Section 2 reviews the relevant literature, Section 3 outlines the methodology, Section 4 presents the results, and the final section provides a comprehensive discussion of the findings.

2. Literature Review

After the 2008 GFC, following the European debt crisis, and, notably, with the emergence of the COVID-19 pandemic, investors and policymakers flew around looking for any safe-haven asset to keep in their reserves. Nicola et al. (2020) argued that COVID-19 will cause a relative economic recession and financial crisis. This might force the investors to continuously manage their portfolios. Accordingly, the safe haven feature of several assets has been the main concern for policymakers and investors. Among these assets, BTC and commodities have been paid considerable attention.

Since it emerged as a solution to the fragile global financial system, BTC has been considered as a leading digital currency and an investment destination, offering investors a novel investment opportunity (Dyhrberg 2016; Bouri et al. 2020). During its first year of creation, BTC was valued at $0 in 2009 and increased to around $1000 at the onset of 2014. In December 2017, the BTC price increased considerably and reached $20,000. As a result, CME Group and the CBOE established futures contracts with BTC as a fundamental asset, making it more legitimized.

This has developed BTC’s position to join commodities in futures markets, and it pushed its role to be at the center of the financial world. With the spread of COVID-19, BTC’s price rose to over $27,000 at the end of 2020. BTC’s role as an investment shelter during stress periods, such as the current health crisis, has been paid considerable attention in academic research. Some studies like (Corbet et al. 2020; Bouri et al. 2020) suggest that BTC can protect investors’ portfolios through diversification gains. In the same context, commodities have been considered as significant components of investment portfolios for participants and investors following the susceptibility of stock markets to reduce risk and to make optimal investment choices (Salisu et al. 2020). Different commodities are considered more stable assets, their values reflect pricing in areas, and they provide protection against unexpected increasing prices and recession.

Given its features, both BTC and commodities have attracted investors and academic research to examine its role as a safe haven, especially during turmoil periods. When in—for any reason—times of serious financial and economic disruption, many investors look for alternative instruments (e.g., commodities or BTC) as safe-haven assets. Baur and Lucey (2010) and Shahzad et al. (2020) notice an asset as a safe haven if it is negatively correlated or uncorrelated with another asset during the crisis periods. In this context, studies including Shahzad et al. (2020), Conlon and McGee (2020), Corbet et al. (2020) and Yarovaya et al. (2021) confirm that gold can have the role of a safe-haven asset during periods of crisis. Dutta et al. (2020) and Pho et al. (2021) examine whether gold or BTC is a better portfolio diversifier. Dutta et al. (2020) show that the introduction of both gold and oil can minimize the portfolio risk during the COVID-19 outbreak more than the investment in BTC markets. Similarly, Pho et al. (2021) found that, while the return increases more with BTC than gold, BTC increases the risk more than gold; this indicates that, for risk-averse investors, gold is a better portfolio diversifier than BTC.

However, BTC might be a better alternative for risk-seeking investors. Conlon and McGee (2020) and Corbet et al. (2020), in relation to gold and cryptocurrencies, find consistent evidence that BTC does not offer hedging nor safe-haven properties during the COVID-19 pandemic. Using vine copula to examine the dependence among energy commodities, gold, and BTC returns, Syuhada et al. (2021) find that gold can substantially ameliorate the portfolio, including gold and energy commodities, which indicates the gold safe-haven feature. However, they find an inconsistent role for BTC as a safe haven. However, the study of Mnif et al. (2020) found that BTC became more efficient during the recent pandemic.

Another strand of literature examined the conditional dependencies among commodities and BTC. Bouri et al. (2020) apply the wavelet coherence approach and assess diversification with wavelet VaR to study the dependence of BTC, gold, commodities, and the USA and Chinese stock markets during the period between 2010 and 2018. They reveal that BTC is the least dependent at various time scales, while commodities are the most dependent. This result indicates that BTC dominates both gold and commodities in terms of diversification benefits. Albulescu et al. (2020) find an asymmetric dependence structure between metal, energy, and agriculture price returns during the COVID-19 outbreak. Moreover, the dependence between energy with both metals and agriculture commodities markets at lower tails is higher. Mensi et al. (2020) use the spillover index and wavelet coherence approaches to analyze the co-movements and correlation between precious metals and energy futures markets from 1999 to 2019. They found that dynamic spillovers among markets are intensified during periods of crisis. Similarly, Al-Yahyaee et al. (2019) evaluate the dependence structure among four precious metals using a copula quantile-on-quantile technique. They show that the dependence among markets varies across time and quantiles. Junttila et al. (2018) investigate the correlations between stock and gold and oil futures markets. They find that oil and gold offer both diversification benefits and negative correlations during times of economic turmoil.

Wu (2021) shows that commodities such as crude oil and agriculture commodities behave quite differently during the turmoil periods (e.g., GFC). Therefore, their role as safe-haven assets is worth further exploration, especially with the current COVID-19 pandemic.

Since COVID-19 has brought the global economy into a new crisis period, investor sentiment and market conditions have undergone tremendous changes (Ashraf 2020; Conlon and McGee 2020). Investors’ reactions and anticipations differ following the different trends. Therefore, the market dynamics show important variations during this new pandemic that affect all the financial and commodity markets worldwide. Albulescu et al. (2020) discussed that this epidemic leads to a drop in the prices and returns of assets; Mzoughi et al. (2020) demonstrate that the COVID-19 has a stronger impact on the stock market. Goodell (2020) refers to past similar events and points out that COVID-19 could bring a direct global destructive impact, raising the risk of spillovers among different assets. McKee and Stuckler (2020) proposed that there could be either one wave or a series of waves of the pandemic for some countries, which would bring serious financial and economic risks.

Accordingly, several assets show substantial losses at the beginning of 2020 and continue at the same movement along the period of crisis. A spectacular fall in oil price after failed negotiations between Russia and OPEC has worsened the scent further. Two months after the onset of the COVID-19 epidemic in Wuhan city, the per barrel price of the Brent crude slipped to $22.58 in March 2020. At the same time, the US West Texas Intermediate (WTI) price reached less than $20 per barrel. These prices are the lowest in the last decade. Such a drop in oil prices in the midst of the COVID-19 outbreak has induced higher probabilities of tail-risks in the oil-derived assets. Thereafter, the volatility of oil markets has substantially increased, and this caused extreme losses to investments in these markets. The large fluctuations in energy will notably affect the economic growth of OPEC and non-OPEC countries, thus affecting the price of precious metals and other commodities including agricultural products. OPEC countries are heavily reliant on oil exports, making their economies and stock markets more sensitive to fluctuations in oil prices (Banerjee et al. 2023; Khan et al. 2023). Non-OPEC countries, on the other hand, often have more diversified economies, which may result in different responses to shocks in commodity markets (Ziadat and Maghyereh 2024).

Given that this crisis contains several problems, it is of interest to analyze the role of different assets during this period. However, empirical analysis about the optimal portfolio diversification among various types of commodities and BTC in the stock market portfolio is still scarce. This study, therefore, aims to analyze the safe haven, hedge, or diversification property of BTC and different types of commodities in the stock market portfolio in OPEC and non-OPEC countries to identify alternative ways to reduce the risks of exposure to the current shocks and orientate the investment decisions.

To fulfill this task, we use the wavelet approach to analyze the dependency between commodities and BTC in the stock market portfolio. In addition, we examine the optimal portfolio using CVaR. which can show the investor’s level of risk aversion through the confidence level associated with each measure.

In fact, this study examines two main hypotheses:

H1. 

Commodities and Bitcoin (BTC) significantly influence stock market performance in OPEC and non-OPEC countries, with the magnitude and nature of these effects varying based on the economic structure and dependency on oil exports.

H2. 

Commodities and Bitcoin (BTC) exhibit distinct roles as diversifiers, hedges, or safe havens in OPEC and non-OPEC stock portfolios, with their effectiveness varying under normal conditions and during periods of market turmoil.

3. Methodology

3.1. Wavelet

The main goal of studying the correlation between commodity and stock markets, as well as between Bitcoin (BTC) and stock markets, is to determine whether commodities or BTC influence stock markets, or vice versa. To address this, we employed the wavelet correlation method, which examines how closely two time series move together, accounting for both time and frequency variations. A coherence value near one indicates strong common behavior between the series, while a value close to zero suggests they do not behave similarly. We also used wavelet phase differences to differentiate between positive and negative correlations.

A key advantage of the wavelet approach is its ability to perform localized analysis of time series, particularly by capturing the movements of index returns and oil prices across two frequency bands. Additionally, this method is well-suited for analyzing non-stationary variables. The wavelet approach provides deeper insight into the spillover effects between global stock, commodity markets, and BTC, highlighting potential spillovers and contagion. As a result, it is a valuable tool for portfolio diversification and risk management.

Wavelet functions are composed of scale parameters, location, and a mother wavelet function ($\psi \in L^2\left(R\right))$ defined as

$${\psi }_{t,s}(t)={\displaystyle \frac{1}{\sqrt{\left|s\right|}}} \psi \left({\displaystyle \frac{t-r}{s}}\right) ,s,t \in R,s\ne 0$$

where:

• ${\displaystyle \frac{1}{\sqrt{\left|s\right|}}}$ represents a normalization factor guaranteeing unit variance of the wavelet and ${‖{\psi }_{t,s}‖}^2=1$;
• $S$ is a scaling factor that controls the width of the wavelet; scale has an inverse relation to frequency. A higher scale indicates a stretched wavelet that is suitable for detection of a lower frequency;
• $\tau$ is a conversion parameter that controls the location of the wavelet.

There are various types of wavelets, but, in this study, we focus on wavelet coherency (WTC), as defined by Torrence and Compo (1998) and Aguiar-Conraria et al. (2008). WTC is the ratio of the cross-spectrum to the product of each series’ spectrum and can be interpreted as the local correlation between two time series in the time–frequency domain. According to Torrence and Compo (1998), WTC is defined as follows:

$$R_{xy}^2={\displaystyle \frac{{\left|{SW}_{xy}\right|}^2}{S\left({\left|W_x\right|}^2\right)S\left({\left|W_y\right|}^2\right)}}$$

where S is a sleeking operator in both scale and time. Noticeably, $R_{xy}^2$ close to one indicates evidence of strong correlation, whereas $R_{xy}^2$ close to zero provides a weak correlation.

We assess the statistical significance of WTC levels using Monte Carlo methods, as the theoretical distribution for WTC has not been established (Grinsted et al. 2004). Due to the squared nature of WTC, we cannot distinguish between positive and negative correlations. To do so, we use the phase difference tool, which helps identify whether correlations are positive or negative and detect lag–lead relationships between two time series as a function of frequency.

In our study, we interpret the phase difference based on the direction of arrows in the WTC plots. Arrows pointing to the left (or right) indicate that the two time series are out of phase (in phase). Arrows pointing downward or upward represent a causality relationship between the series. Specifically, if arrows point straight down (up), it signifies that the first variable, y(t), is lagging (leading).

3.2. Conditional Value at Risk (CVaR)

Conditional Value at Risk (CVaR), introduced by Uryasev and Rockafellar (1999), is a measure of expected loss that is considered more coherent than Value at Risk (VaR). CVaR estimates the expected loss, given that the loss exceeds the VaR threshold. Unlike VaR, which is not convex, CVaR is convex. This convexity makes it easier to minimize the CVaR function with respect to portfolio weights compared to minimizing a VaR function (Uryasev and Rockafellar 1999). For a given confidence level, CVaR is defined as follows (Uryasev and Rockafellar 1999):

$${CVaR}_{\propto }={\displaystyle \frac{1}{1-\propto }}{\int }_{-\infty }^{{VaR}_{\propto }}xf\left(x\right)dx$$

where $f\left(x\right)$ represents the marginal probability function of portfolio returns x over the given time period.

4. Results

In

Table 1. Descriptive Statistics.

	Mean	Maximum	Minimum	Std. Dev.	Skewness	Kurtosis	Jarque-Bera	LM	ARCH
SP500	0.048	8.968	−12.765	1.072	−0.897	22.800	39,955.14 ***	268.54 ***	989.17 ***
MEXICO	0.012	4.733	−6.610	0.929	−0.505	7.960	2589.64 ***	46.109 ***	554.29 ***
RUSSIA	0.022	7.676	−11.152	1.224	−0.901	12.632	9707.21 ***	12.066	213.5 ***
U_A_E_	0.019	10.246	−15.799	1.266	−1.259	25.204	50,477.4 ***	50.366 ***	570.74 ***
SAUDIARABIA	0.013	8.511	−16.897	1.145	−2.281	35.913	11,1607 ***	63.576 ***	161.17 ***
KUWAIT	0.003	6.932	−21.744	0.908	−6.301	149.783	21,9393 ***	116.2 ***	211.71 ***
ALUMINIUM	−0.005	6.395	−7.827	1.163	0.216	5.546	673.823 ***	40.501 ***	225.31 ***
PALLADIUM	0.046	16.961	−15.677	1.869	−0.572	13.702	11,709.6 ***	31.998 ***	420.28 ***
PLATINUM	−0.023	9.341	−14.418	1.362	−0.460	11.194	6873.30 ***	54.422 ***	319.06 ***
SUGAR	−0.029	8.721	−8.418	1.553	0.210	5.1977	505.978 ***	5.9069	77.185 ***
WHEAT	−0.005	23.915	−24.667	2.114	0.227	23.210	41,308.2 ***	45.973 ***	480.76 ***
BRENT	−0.033	57.325	−95.263	3.575	−6.161	247.660	6,066,073 ***	165.83 ***	353.28 ***
GASOLINE	−0.031	27.196	−51.244	2.840	−2.995	65.149	394,065 ***	353.28 ***	348.85 ***
GOLD	0.001	5.432	−10.162	0.982	−0.794	11.562	7665.91 ***	5.4209	72.617 ***
BT	0.307	48.478	−66.395	5.751	−1.127	24.068	45,382.2 ***	41.28 ***	281.06 ***

*** significant at 1%.

, we examine the relationship between commodities, stocks, and Bitcoin (BTC) from 18 August 2011 to 3 December 2020. Daily prices of Brent and Gasoline are used to represent the energy market, while wheat and sugar are included to represent agricultural products. Gold, platinum, and palladium are chosen to represent precious metals, and aluminum is used for industrial metals. For stock markets, we focus on the S&P3 Saudi Arabia, S&P Kuwait BMI, S&P United Arab Emirates BMI, S&P Russia BMI, NIKKEI225, S&P Mexico BMI, and the S&P index.

In our study, we analyze log-returns, which are calculated as $r_t$ = $ln$ ($P_t$/$P_{t-1}$) from the original price series. Regarding the descriptive statistics, the mean returns of the variables are close to zero, with excess kurtosis and negative skewness, except for Aluminum, Sugar, and Wheat. The series exhibit fat tails, and the Jarque–Bera test rejects the hypothesis of normality. Additionally, the Ljung–Box statistic indicates the presence of serial correlation in all series, except for S&P Russia BMI, Gold, and Sugar.

4.1. Wavelet Approach

The Supplementary Materials present the wavelet coherence between commodities, BTC, and the return markets of both OPEC and NON-OPEC. The black contour lines indicate the 95% confidence intervals. The horizontal axis represents the study period in days, while the vertical axis shows the frequency. The color scale ranges from blue to yellow, with blue indicating low coherence and yellow indicating high coherence. The lighter black line marks the boundary of regions with high power and the “cone of influence”, where edge effects become significant. The direction of the arrows provides information about the phase lag–lead relationship between commodities, BTC, and the return stock markets.

Arrows pointing to the right signify that the variables are in phase, while those pointing to the left indicate that the variables are out of phase. Additionally, arrows pointing left–up or right–down suggest that commodities or BTC lead the stock markets, whereas arrows pointing left–down or right–up suggest that commodities or BTC lag behind the stock markets. Areas where variables are in phase suggest a cyclical interaction between markets, while out-of-phase areas indicate an anti-cyclical effect. Regions with stronger interdependence in the time-frequency domain suggest that commodities or BTC have a lower potential as safe havens or hedges for stock markets, and, thus, offer reduced benefits when included in stock portfolios.

For stock markets, The Supplementary Materials indicates that the Brent–stock market pairs exhibit a strong in-phase co-movement at long-term frequency scales (256–1024 days) during the COVID-19 period, as evidenced by the concentration of yellow regions and arrows pointing to the right. The high correlation between OPEC and NON-OPEC economies with Brent suggests that higher Brent prices are associated with increased stock market revenues, as higher Brent prices tend to lead to higher stock market prices. Conversely, at shorter time frames (0 to 32 days), the co-movement between Brent and the stock market is generally low, with WTC values below 0.3. At medium-term horizons (32 to 128 days), the contour plots reveal some evidence of significant co-movement, particularly around the stock market crashes during the European sovereign debt crisis in 2012 and COVID-19 in 2020.

The direction of the arrows in regions of high co-movement indicates that energy commodities demonstrate a time-varying lag–lead relationship with the stock market in the time–frequency domain. At frequencies beyond 256 days and at lower frequencies, we observe alternating periods of right–down arrows, which indicate that energy commodities lag behind the stock market, and right–up arrows, which show that crude oil leads the stock market. However, the leading position of energy commodities is more common than their lagging position.

The Supplementary Materials highlights a significant out-of-phase co-movement at the long-term frequency band (256–512 days). The yellow region at the bottom indicates a strong co-movement between energy commodity prices and stock markets at high frequencies. The arrows pointing to the right suggest that the co-movements of energy commodities and stock markets for both OPEC and NON-OPEC countries were in phase, indicating a positive relationship between energy commodity prices and stock markets. The figure shows that this interdependence is stronger over long-term scales compared to short-term scales. For OPEC and NON-OPEC countries, the connection between stock markets and oil prices is weak in the short term (less than 128 days) but becomes more pronounced in the long-term and medium-term frequencies. The results are similar for agricultural, industrial, and other metal commodities, except for gold, which exhibits a hedging role. This finding aligns with the results of Bouri et al. (2020).

The variation in interdependence between OPEC and NON-OPEC countries suggests that deviations in different types of commodities significantly influence stock markets in these regions. Based on these results, we conclude that, from a time-domain perspective, there was a strong yet heterogeneous relationship during the COVID-19 period across all countries.

Our findings on the co-movements between oil price returns and stock returns align with those of Mensi et al. (2021), who observed that such co-movements predominantly occur over the long term. Similarly, we corroborate the observations of Younis et al. (2025) regarding stronger co-movements in GCC countries, particularly Kuwait, Saudi Arabia, and the UAE. Our study, however, advances this understanding by identifying specific lead–lag dynamics and heterogeneities between OPEC and non-OPEC markets, which have been less emphasized in prior research. In contrast, our results diverge from those of Buyuksahin et al. (2008) and Büyükşahin and Robe (2014), likely due to variations in macroeconomic factors, financial market conditions, and increased commodity speculation during our study period. Additionally, our findings are consistent with Xu and Kinkyo (2023), who demonstrated Bitcoin’s effectiveness as a short-term risk hedge compared to gold in G7 stock markets during the COVID-19 pandemic. By extending these insights to OPEC and non-OPEC markets, we highlight Bitcoin’s superior diversification benefits, adding a novel perspective to the existing literature.

4.2. Results of Conditional Value at Risk (CVaR)

Modern portfolio theory suggests that investors seek to diversify their portfolios to minimize the market risk. Previous studies have indicated that commodities and BTC can offer substantial diversification benefits due to their low correlations with stocks. In essence, modern portfolio theory is an investment framework focused on constructing and selecting portfolios based on the principles of hedging and diversification. This involves carefully choosing a mix of investment assets that collectively exhibit lower risk compared to investing in a single asset class.

The descriptive statistics reveal that the data exhibit fat tails and excess kurtosis. To determine the optimal portfolios that balance maximizing returns with minimizing risk, we will use Conditional Value at Risk (CVaR) as a downside risk measure. CVaR can capture the impact of heavy tails and allows us to reflect the investor’s risk aversion through the confidence level associated with each measure. The optimal portfolio is identified by minimizing risk while targeting a specific expected return.

We will divide our study period to assess whether the role of commodities or BTC changes across different time frames. Specifically, we will examine the optimal portfolios before and after COVID-19. The CVaR results will be compared across these periods to evaluate how risk levels have shifted.

4.2.1. Results Before COVID-19

Specifically, an investor aiming to minimize risk for OPEC countries should focus on a portfolio that includes BT, Palladium, and stock markets of the UAE, Kuwait, and Saudi Arabia. This strategy will be advantageous if BT or Palladium increases, as there is a positive correlation between these assets and the stock market indices.

For non-OPEC countries, the optimal risk-minimizing portfolio should include BT, Gold, and stock markets of the USA and Mexico. This portfolio allows the investor to benefit from increases in BT due to its positive correlation with stock market indices, while also gaining from decreases in Gold, as it has a negative correlation with the stock markets.

4.2.2. Results During COVID-19

For OPEC countries, there is a positive correlation between BT and the stock market, meaning that an increase in BT will enhance portfolio performance. Similarly, there is a positive correlation between Palladium and the stock market, as well as between Platinum and the stock market.

For non-OPEC countries, the correlation between Gold and the stock markets is negative. Therefore, investors can benefit from a decline in Gold. Overall, the results indicate that, during the COVID period, including BT and Gold in the portfolio helps minimize risk.

The findings can be summarized as follows: First, for both OPEC and non-OPEC countries, the relationship between stock markets and oil prices is relatively weak in the short term (less than 128 days) but strengthens over medium- and long-term time horizons. A similar pattern is observed for agricultural, industrial, and other metal commodities, with the exception of gold, which serves as an effective hedge. Second, a CVaR analysis reveals that Bitcoin (BTC) offers greater diversification benefits than commodities, with gold ranking second. Our results indicate that incorporating BTC into investment portfolios can help reduce risk, even for OPEC countries.

5. Conclusions

We have examined the benefits of including commodities and Bitcoin (BTC) in stock portfolios for both OPEC and NON-OPEC countries, using daily data from 2011 to 2020. Our primary contribution is assessing BTC’s role as a safe haven, hedge, or diversifier against stock markets in these countries—a topic not previously explored, especially in regions where BTC trading is not formally regulated. Additionally, we identify the optimal portfolio configurations before and during the COVID-19 crisis using Conditional Value at Risk (CVaR).

Our methodology involves two main steps. First, we use the wavelet approach to explore the relationships between BTC and stock markets, as well as between commodities and stock markets in both OPEC and non-OPEC countries. Second, we evaluate the optimal portfolio using CVaR.

Our findings reveal a reduction in the diversification benefits of commodities and BTC for stock portfolios in both OPEC and non-OPEC countries over the long term, as the co-movement between commodities, BTC, and stock markets increases from low to high frequencies. During COVID-19, the high synchronization among these assets undermines BTC’s potential as a safe haven. Moreover, the varying co-movement across frequencies suggests that a constant hedging coefficient and fixed asset allocation between BTC and stocks are unsuitable for portfolio management. The wavelet analysis provides valuable insights into the frequency-domain relationships among commodities, BTC, and stock markets.

We also find that, for non-OPEC countries, gold serves as a hedge for stock markets. This means that holding gold can compensate for losses during both stable and turbulent periods due to its positive relationship with BTC, despite its negative correlation with stock markets.

Given the strong correlations between BTC (and gold) and stock markets in both OPEC and non-OPEC countries, constructing a multi-asset portfolio to mitigate risk through diversification is essential. Traditional risk measures, such as equilibrium analysis and standard deviations, are insufficient for capturing diverse and transient risk behaviors.

Therefore, we use CVaR to address the limitations of conventional models. Our CVaR analysis demonstrates that BTC provides superior diversification benefits compared to commodities, followed by gold. These findings align with Bouri et al. (2020), which suggest that BTC acts as a unique risk minimizer in portfolios. BTC’s price has surged notably, remaining virtually uncorrelated with stock markets, indicating its potential as a new form of “virtual gold.” While stock market inflation is partially due to quantitative easing, this does not apply to Bitcoin, as most new money has not been invested in it due to various regulatory and institutional issues. Our analysis shows that including BTC in portfolios can reduce risk even for OPEC countries.

These results offer valuable insights for investors and traders, providing empirical evidence that Bitcoin shares some of the benefits of commodities in protecting against extreme downturns in global stock markets for both OPEC and non-OPEC countries.