Time-varying relationship and diversification between sin stocks, Bitcoin and gold

Although market preferences appear to have shifted toward sustainability, sin stocks, linked to activities such as gambling, tobacco, alcohol, or weapons, continue to outperform sustainable stocks in returns and resilience to market shocks. However, their relationship with other asset classes remains underexplored. Thus, this paper examines the connections and diversification benefits of sin stocks with gold, a traditional safe haven, and Bitcoin, a quasi-safe haven, for January 1, 2014–December 31, 2024 period. Our findings reveal a weak to negligible positive relationship between sin stocks, Bitcoin, and gold under stable market conditions, which quickly intensifies in market downturns. Both assets provide substantial diversification benefits for sin stocks until mid-2019, when their positive co-movement is minimal. Nevertheless, it strengthens during global crises occurring afterwards, including the COVID-19 pandemic, energy crisis, and Russia–Ukraine conflict, and neither Bitcoin nor gold act as safe haven assets. Nonetheless, the diversification benefits, although reduced, remain more pronounced for gold than for Bitcoin. Bitcoin exhibits both short- and long-term positive correlations with sin stocks, along with unstable lead–lag dynamics, whereas gold displays only short-term positive co-movement before reverting to weaker correlations.