Analyzing Miners’ Correlation amid Falling Metals



Mining companies and gold

The precious metals market has skyrocketed in 2016. Despite this trend, it’s crucial for investors to know which mining stocks are overperforming and which are underperforming their peers.

Mining companies that have high correlations with gold include Agnico-Eagle Mines (AEM), Silver Wheaton (SLW), and Franco-Nevada (FNV). On a YTD (year-to-date) basis, these stocks have risen by 99.5%, 113.8%, and 58.1%, respectively. The substantial returns seen by most mining companies were due to safe-haven bids. They boosted gold and other precious metals. However, Primero Mining (PPP) has a slight correlation with gold—possibly due to its YTD loss of 29.8%.

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Correlation trends

As you can see in the above table, Agnico-Eagle is the most correlated with gold on a YTD basis, while Primero is the least correlated to gold.

All of the gold miners listed above except for Agnico-Eagle and Franco-Nevada have seen their correlations with gold rise. Gold’s correlation with Agnico-Eagle has risen from a 0.59 three-year correlation to a 0.64 one-year correlation. A correlation of 0.64 suggests that about 64% of the time, Agnico-Eagle has moved in the same direction as gold in the past year. A fall in gold leads to a fall in mining stocks’ prices. A rise in gold leads to a rise in mining stocks’ prices.

Primero Mining and Silver Wheaton’s relationship with gold may not be stable because the correlation sees upward and downward movements.

Together, the four stocks mentioned above account for 15.4% of the VanEck Vectors Gold Miners ETF (GDX).


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