Segmented or Integrated? Volatility Connectedness between Commodity Futures and Cryptocurrencies
Abstract
This study examines whether commodity futures and cryptocurrency markets constitute a single integrated risk system or remain largely segmented in terms of volatility. Using daily data on six commodity futures contracts (gold, silver, copper, WTI crude oil, natural gas, wheat) and four cryptocurrencies (Bitcoin, Ethereum, XRP, Litecoin) over 25 August 2016 – 30 June 2026 (2,471 trading days), conditional volatilities estimated by GARCH(1,1) are embedded in a ten-variable VAR, and spillovers are measured with the Diebold–Yılmaz connectedness framework. The central contribution decomposes total connectedness into within-block and cross-block components, complemented by DCC-GARCH return correlations. Total connectedness is 28.7%, yet 61.4% occurs within the crypto block and 34.9% within the commodity block, leaving only 3.6% to cross-block transmission. Natural gas (+20.4) and Ethereum (+8.5) are the leading net transmitters and gold the largest net receiver (−18.7). Commodity–crypto correlations remain low and inert (0.040–0.123), and the segmentation is robust to the forecast horizon, VAR lag length, window width, return frequency, volatility measure, sample period and data source. The findings indicate distinct shock sources and durable diversification; aggregate connectedness can conceal block structure.
Keywords
Volatility Connectedness, Diebold–Yılmaz, DCC-GARCH, Cryptocurrency, Commodity Futures
Supporting Institution
The author has declared that he received no financial support for this study.
Ethical Statement
Ethics committee approval is not required for this study.
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