Studying the Correlations of Mining Companies with Gold



Correlation with gold

The precious metals market has skyrocketed in 2016. Despite this trend, it’s crucial for investors to know which mining stocks are overperforming or underperforming their peers. This will help investors to short-list upstream and downstream stocks.

Precious metals mining shares that have high correlations with gold include GoldCorp (GG), Newmont Mining (NEM), Coeur Mining (CDE), and Barrick Gold (ABX). On a YTD (year-to-date) basis, these four stocks have risen by 58.3%, 128.6%, 443%, and 177%, respectively. These substantial returns are most likely due to the same safe-haven bids that have boosted gold and other precious metals.

Most mining companies have seen losses over the past few days due to the reduced positive sentiment for gold as tremors over the Brexit vote result subside.

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Correlation trends

As we can see in the above table, Barrick Gold is the most correlated with gold YTD among the four stocks mentioned above. Coeur Mining is the least correlated to gold YTD. Note that Coeur Mining is a major silver miner.

GoldCorp has seen its correlation to gold rise. For GoldCorp, the correlation rose from a 59.3% three-year correlation to a 64.3% one-year correlation. A correlation of 64.3% suggests that about 64% of the time, GoldCorp moved in the same direction as gold over the past year.

The relationships of the other three miners with gold haven’t been stable over the past three years. Their correlations have seen upward and downward movements.

Together, these four stocks make up 20.2% of the VanEck Vectors Gold Miners ETF (GDX).


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