Mining Stocks: Analyzing Correlation Trends

Mining stocks’ performance usually depends on precious metals’ performance. However, the two can deviate. Correlation analysis can give investors some perspective on how mining stocks relate to gold and silver.

In this part of our series, we selected a few miners—Yamana Gold (AUY), Pan American Silver (PAAS), Coeur Mining (CDE), and Barrick Gold (ABX).

The iShares MSCI Global Gold Miners (RING) and the Vaneck Vectors Gold Miners (GDX) also track precious metals. These funds fell 0.17% and 0.62%, respectively, on a five-day trailing basis.

Among the four miners we’re examining, Pan American has had the lowest correlation with gold this year while Yamana Gold has had the highest.

Yamana has seen an uptrend in correlation over the past three years while Barrick has seen a downtrend. The other two miners saw mixed trends.

Yamana Gold’s correlation has risen from a three-year correlation of 0.71 to a one-year correlation of 0.91. A correlation of 0.91 suggests Yamana has moved in the same direction as gold ~91% of the time over the past year. A correlation of 0.91 indicates that about 91% of the time, Yamana has moved in gold’s direction over the last year.

A correlation analysis is crucial because it can help you determine whether the stock could be influenced by changes in gold.