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Understanding Precious Metals and Cross-Commodity Rates

PART:
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Part 5
Understanding Precious Metals and Cross-Commodity Rates PART 5 OF 7

A Correlation Study of a Few Key Mining Stocks in September 2017

Mining stock correlations with gold

In this part of our series, we’ll look at mining stocks’ correlations with precious metals by comparing their price movements. Specifically, we’ll analyze Agnico-Eagle Mines (AEM), Silver Wheaton (SLW), Randgold Resources (GOLD), and Pan American Silver (PAAS).

A correlation analysis is crucial because it gives investors clues about the possible movement of mining stocks in relation to precious metals.

A Correlation Study of a Few Key Mining Stocks in September 2017

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Mining funds such as the Global X Silver Miners (SIL) and the VanEck Vectors Juniors Gold Miners (GDXJ) also tend to closely track precious metals, especially gold and silver. These two funds have fallen 3.3% and 3.1%, respectively, on a 30-day trailing basis.

Correlation trends

Among the four miners that we’re analyzing, Pan American has the lowest correlation with gold on a YTD (year-to-date) basis, while Silver Wheaton has the highest correlation with gold.

Only Silver Wheaton has seen a rising trend in its correlation with gold over the past three years, while the other three miners have seen a mix of up and down trends. Silver Wheaton has a three-year correlation of 0.70 and a one-year correlation of 0.81.

Remember, a correlation of 0.81 indicates that about 81.0% of the time in the past year, Silver Wheaton has moved in the same direction as gold.

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