Risk-adjusted performance, performance persistence, and portfolio diversification of multi-crypto exchange-traded products
DOI:
https://doi.org/10.26905/afr.v9i2.17399Keywords:
Cryptocurrency exchange-traded products, Performance persistence, Portfolio diversification, Risk-adjusted performance, Walk-forward backtestingAbstract
The proliferation of cryptocurrency-based exchange-traded products (ETPs) presents investors with a product-selection and portfolio-allocation challenge that the existing literature has examined only partially. This study constructs an exploratory, integrated four-stage investor-facing framework, including: risk-adjusted performance, out-of-sample persistence, cross-asset positioning, and portfolio diversification. The framework was applied to fifteen multi-crypto ETPs spanning Canada, Switzerland, the United States, and Brazil over 1 June 2022 to 31 December 2025. The performance varies; annual returns ranged from −34.68% to 46.24% and rankings shift materially when downside-risk metrics were applied. The persistence evidence is statistically insignificant; the Top-minus-Bottom spread is 0.64% per month (Newey-West t = 0.63), implying that historical alpha has limited predictive value. The ETPs occupy a distinct risk–return profile relative to BTC, ETH, gold, and the domestic equity index. In the portfolio stage, a 10% BTC sleeve shows the largest improvement in which the annualized return of +4.00%, Sharpe +0.253, with stable volatility and improved downside, thus combining a return effect and a diversification effect. A diversified ETP sleeve provides the most convincing ETP-based alternative, consistently outperforming a single-product sleeve on risk-adjusted metrics and turnover. The explained advantage widens once transaction costs are applied. Ultimately, the value of cryptocurrency exposure is conditional, depending on instrument form, allocation size, and investor access to spot assets.
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