How Did Miners’ Correlations Trend in July?
Mining stock movement
It’s important for investors to analyze how mining companies’ daily fluctuations relate to the metals they mine. For this final part of our series, we’ll analyze the correlations of First Majestic Silver (AG), B2Gold (BTG), Cia De Minas Buenaventura (BVN), and AngloGold Ashanti (AU) with gold.
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The iShares MSCI Global Gold Min (RING) and the SPDR S&P Metals and Mining (XME) are also closely correlated with gold. RING and SGDM have risen 5.4% and 4.9% year-to-date, respectively, as of Wednesday, July 31.
Among the above miners, Cia De Minas has the highest correlation with gold, while AngloGold has the lowest correlation. Only Cia De Minas has seen an upward trend in its correlation, while the other three miners have seen a downward trend in their correlations with gold.
A rising correlation indicates that price fluctuations in gold could cause mining shares to move in the same direction. A drop in correlation suggests that the returns of a mining stock may diverge from what’s happening with the price of the metal.
First Majestic’s correlation has fallen from a three-year correlation of ~0.71 and a one-year correlation of ~0.65 with gold. A correlation of ~0.65 means that the share price has moved alongside gold about 65% of the time since the beginning of 2017. But correlations can move in different directions at different times.