Quantifying Crypto-Equity Interconnectedness Using RStudio: A Sectoral Network Analysis

Abstract

As​‍​‌‍​‍‌​‍​‌‍​‍‌ traditional equity markets continue to integrate with digital assets, understanding the connectedness between these two becomes a must. This study, in the context of sectoral indices of the Banking and Information Technology in India, aims to evaluate how digital assets are connected to stock indices. It also points out the importance of diversification and hedging. The main goal was to measure the extent of dynamically changing dependencies in interlinkages and at the same time find the best digital asset pairings that would help in risk mitigation of the portfolio.
The study covers daily returns for the period of April 2022 to March 2025. It uses two econometric models, TVP-VAR and DCC-GARCH, to conduct the analysis in RStudio. The findings indicate that Ethereum and Bitcoin are the biggest sources of volatility, while stablecoins, like USDC, are almost perfect hedging instruments. Sectoral indices as net shock receivers are showing their exposure. The main takeaway is that digital assets facilitate diversification and hedging, thus leading investors in the right direction in the context of the Indian ​‍​‌‍​‍‌​‍​‌‍​‍‌economy.