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A Correlation Study of the Major Mining Stocks

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Sep. 20 2017, Updated 2:17 p.m. ET

Correlation of miners

In this part of the series, we’ll analyze the correlation of mining stocks with precious metals by comparing their price movements. Specifically, we’ll analyze Royal Gold (RGLD), Goldcorp (GG), New Gold (NGD), and Newmont Mining (NEM).

These mining funds are also closely linked to the precious metals and share a strong correlation with these metals. The Global X Silver Miners ETF (SIL) and the Sprott Gold Miners ETF (SGDM) fell 4.6% and 3.7%, respectively, on a five-day trailing basis due to the slump in gold and silver.

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Correlation trends

Among the four miners we’re studying, New Gold has the highest correlation to gold on a YTD (year-to-date) basis, while Goldcorp has the lowest correlation to gold.

Goldcorp, Newmont Mining, and New Gold have seen upward scaling correlations to gold over the past three years. Royal Gold has seen a mixed correlation to gold.

Goldcorp saw its three-year correlation rise from 0.51 to a one-year correlation of 0.57. A correlation of 0.57 indicates that about 57.0% of the time, Goldcorp has moved in the same direction as gold.

A correlation reading of miners is crucial since stock movement can be studied by utilizing fluctuations in precious metals.

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