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Correlation Analysis of Precious Metal Miners as August Begins

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Aug. 7 2017, Updated 8:40 a.m. ET

Mining stock movement

It’s important to analyze how mining companies’ daily fluctuations relate to the metals they mine. For this final part of our series, we’ll analyze the correlations of Coeur Mining (CDE), Barrick Gold (ABX), Buenaventura Mining (BVN), and AngloGold Ashanti (AU) with gold.

The iShares MSCI Global Gold Miners (RING) and the Sprott Gold Miners ETF (SGDM) are also closely correlated with gold. RING and SGDM have risen 1.3% and 0.41%, respectively, on a five-day trailing basis.

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Correlation trends

Among the above miners, Buenaventura Mining has the highest correlation with gold, while AngloGold Ashanti has the lowest correlation. Buenaventura Mining and Barrick Gold have seen upward trends in their correlations, while AngloGold Ashanti has seen a downward trend in correlation.

A rising correlation indicates that price fluctuations in gold could cause mining shares to move in the same direction. A fall in correlation suggests that the returns of a mining stock may diverge from what’s happening with the price of the metal.

AngloGold’s correlation has fallen from a three-year correlation of ~0.66 and a year-to-date correlation of ~0.58 with gold. A correlation of ~0.58 means that the stock price has moved alongside gold about 58.0% of the time since the beginning of 2017. But correlations can move in different directions at different times.

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