Correlation with gold
With the precious metals market picking up momentum and getting ready to skyrocket once again, it’s crucial for investors to know which miners are overperforming or underperforming peers. A shortlist of the upstream and downstream stocks can also be of the utmost importance.
Some of the precious metal mining shares that have a high correlation with gold include Agnico-Eagle Mines (AEM), AngloGold Ashanti (AU), Harmony Gold (HMY), and RandGold Resources (GOLD), which have seen YTD (year-to-date) gains of 94.4%, 138.7%, 307.9%, and 55.2%, respectively. These substantial returns since the beginning of 2016 are most likely due to the haven bids that lifted up gold and other precious metals as well.
More specifically, these four companies have also witnessed tremendous gains over the past five trading days due to the revival in the positive sentiment for gold. These four stocks have jumped by a whopping 13.3%, 21.7%, 22.3%, and 13.3%, respectively, on a five-day trailing basis.
Uptrend or downtrend in correlation
As seen in the above chart, the correlation of Harmony Gold to gold has been increasing over the past three years. From the company’s 50.1% correlation three years ago, it now has a YTD correlation of 61.9%. By contrast, the relationship of Agnico to gold over the past two years has deteriorated, dropping from 60.9% to 59.1%.
On a YTD basis, Randgold Resources is the most correlated to gold, with a YTD correlation as much as 69%. Randgold has witnessed a recent uptrend, however. The correlation of AngloGold with gold has not been stable over the past three years, with up and down momentum clearly visible in the company’s correlation numbers.
Notably, the above four stocks together make up 15.2% of the Vaneck Vectors Gold Miners Fund (GDX), and GDX has surged by a whopping 91.1% YTD.