uploads///CORRELATION

Behind the Correlations of Key Miners Today

By

Nov. 3 2017, Updated 3:40 p.m. ET

Correlation analysis

When investors want to invest in mining stocks, it’s important that they analyze the correlations of mining stocks with gold. Gold is the most dominant of the precious metals and influences not only fellow metals but also mining stocks. Key mining funds also depend on precious metals for their directional moves.

Below, we’ll assess Yamana Gold (AUY), Pan American Silver (PAAS), AngloGold Ashanti (AU), and Eldorado Gold (EGO). Funds that have a strong correlation with gold and silver include the Global X Silver Miners (SIL) and the iShares MSCI Global Gold Miners (RING).

Article continues below advertisement

Correlations with gold

On a YTD (year-to-date) basis, the correlations of the above mining stocks appear to be weak when compared with last year. Among the four miners, Pan American has the lowest correlation with gold, while Yamana has the highest.

These miners—except Pan American—have seen an upward trend in their correlations with gold. Eldorado Gold saw it correlation rise from a three-year correlation of 0.61 to three-year correlation of 0.89.

Remember, a rise in correlation indicates that price changes in gold should actively play a role in mining stocks’ price changes.

A correlation of 0.89 suggests that in the past year, Eldorado has been taking cues from gold ~89.0% of the time. This means that a rise in gold leads to a rise in Eldorado ~89.0% of the time.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.