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Exploring Diversification: Dynamic Relationships among AI, Sustainable Energies, Commodities, and Islamic Investments
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2025-06-18
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Optimal portfolio theory is one of the most important concepts in finance, as it aims to maximize returns while minimizing risk through proper asset allocation strategies. In this study, using the First Trust Nasdaq Artificial Intelligence and Robotics ETF as a proxy, we explore the dynamic linkages between Artificial Intelligence (AI) and other alternative investments by implementing Engle's (2002) DCC-GARCH model, covering the sample period from March 1, 2019, to January 27, 2025. Our findings indicate that crude oil provides diversification benefits to all asset classes under study, and all types of investors can obtain diversification benefits from Islamic investments, except for Artificial Intelligence ETF-based investors. Furthermore, the Artificial Intelligence ETF can provide diversification benefits to all types of investors under study, except for Islamic investment-based investors. This study incorporates the Artificial Intelligence ETF into a research framework encompassing sustainable energies, commodities, and Islamic investment—a combination rarely explored in previous research—and provides guidance on portfolio diversification strategies to interested parties.
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