Mining stocks’ performance is usually based on precious metal price movement. Correlation analysis can give investors insight into how mining stocks relate to precious metals, especially to gold. In this part of our series, we’ll look at the correlations of four miners: AngloGold Ashanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO).
The precious metal-based funds including the Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares (SIVR) saw an upside move in price on Monday, November 27, as the precious metals rebounded. These two funds rose 0.43% and 0.06% on that day.
Among the four miners we’re examining, Eldorado had the highest correlation to gold during the past one year, while Hecla Mining had the lowest correlation.
All the four miners have shown an upward trend in their correlation to gold during the past three years. Eldorado saw its correlation to gold move from a 0.61 three-year correlation to an 0.89 one-year correlation. A correlation of 0.89 suggests that about 89% of the time, Eldorado has moved in the same direction as gold during the past one year.
The trends in correlation could keep changing. A few of the miners have also seen their correlation to gold fall.