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Inside the Mining Correlation Upward Trend

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Mining stocks followed precious metals

It’s important for investors to analyze how mining companies’ daily fluctuations relate to the metals they mine. For this final part of our series, we’ve selected AngloGold Ashanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO) for correlation analysis.

The iShares MSCI Global Gold Min (RING) and the Sprott Gold Miners (SGDM) are also closely correlated with gold. RING and SGDM had risen 3.4% and 2.9%, respectively, as of Wednesday, July 26.

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Correlation trends

Among the above miners, Kinross has the highest correlation with gold, while AngloGold has the lowest correlation. Only Kinross has seen an upward trend in its correlation, while the other three miners have seen a mix of upward and downward trends in their correlations with gold.

Remember, an upward-scaling correlation indicates that price fluctuations in gold could cause mining shares to move in the same direction. A declining correlation suggests that the returns of a mining stock may diverge from what’s happening with the price of the metal.

Kinross’s correlation has now risen from a three-year correlation of ~0.69 and a one-year correlation of ~0.75 with gold. A correlation of ~0.75 means that the share price has moved alongside gold about 75% of the time since the beginning of 2017. But such a correlation can move in different directions at different times.

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