How Closely Are Silver Mining Companies Correlated to Silver?

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Jun. 30 2016, Published 3:55 p.m. ET

Correlation with gold

The precious metal market has skyrocketed in 2016, touching multi-month highs. Accordingly, it’s important for investors to know which mining stocks are overperforming or underperforming their peers. Just as gold mining companies show a high correlation with gold, silver mining companies show a high correlation to silver.

Precious metal mining stocks that have a high correlation with silver include Silver Wheaton (SLW), Pan American Silver (PAAS), Coeur Mining (CDE) and Hecla Mining (HL). These four stocks have seen YTD (year-to-date) gains of 76.3%, 132.3%, 302.4%, and 149.2%, respectively. These substantial returns since the beginning of 2016 are most likely due to the same safe-haven bids that have lifted up gold as well.

Notably, these four companies along with the other miners witnessed tremendous gains after the Brexit scenario due to the revival of the safe-haven appeal of gold.

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Uptrends or downtrends in correlation

The correlation for Silver Wheaton is at its highest YTD. Silver Wheaton has also seen increasing correlation with gold during the past three years. However, the year-to-date correlation remains lower than it has been in the past year. From its 57.3% correlation three years ago, it now has a one-year correlation of 62.8%. The YTD correlation for all these miners has been weak. However, Coeur Mining and Hecla showed a rise in correlation to silver.

These four stocks together make up 8.3% of the VanEck Vectors Gold Miners Fund (GDX).

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