Mining stock correlations with gold
In this part of our series, we’ll look at mining stocks’ correlations with precious metals by comparing their price movements. Specifically, we’ll analyze Agnico-Eagle Mines (AEM), Silver Wheaton (SLW), Randgold Resources (GOLD), and Pan American Silver (PAAS).
A correlation analysis is crucial because it gives investors clues about the possible movement of mining stocks in relation to precious metals.
Mining funds such as the Global X Silver Miners (SIL) and the VanEck Vectors Juniors Gold Miners (GDXJ) also tend to closely track precious metals, especially gold and silver. These two funds have fallen 3.3% and 3.1%, respectively, on a 30-day trailing basis.
Among the four miners that we’re analyzing, Pan American has the lowest correlation with gold on a YTD (year-to-date) basis, while Silver Wheaton has the highest correlation with gold.
Only Silver Wheaton has seen a rising trend in its correlation with gold over the past three years, while the other three miners have seen a mix of up and down trends. Silver Wheaton has a three-year correlation of 0.70 and a one-year correlation of 0.81.
Remember, a correlation of 0.81 indicates that about 81.0% of the time in the past year, Silver Wheaton has moved in the same direction as gold.