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Is the Correlation of Mining Shares Mixed or Directional?

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Correlation analysis

In this part of our series, we’ll look at the correlation between gold and four mining stocks: Coeur Mining (CDE), Barrick Gold (ABX), Kinross Gold (KGC), and Eldorado Gold (EGO). Mining stocks mostly move with gold prices but not always. Among these four miners, Kinross Gold has shown the highest correlation with gold, while Eldorado Gold has seen a negative correlation to gold on a YTD (year-to-date) basis. 

Mining stocks also have a high correlation with gold. The VanEck Vectors Gold Miners ETF (GDX) and the Global X Silver Miners ETF (SIL) also tend to have a strong correlation with gold. They have fallen 4.2% and 6.8%, respectively, YTD.

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Correlation readings

EGO and ABX have seen their correlations with gold fall over the past three years. KGC’s and CDE’s correlations have been mixed. EGO’s three-year correlation with gold is 0.45, whereas its one-year correlation is 0.24. A correlation of 0.24 indicates that 24% of the time, EGO has moved in the same direction as gold over the past year. CDE saw its two-year correlation rise to 0.61 from a three-year correlation of 0.59. Its one-year correlation fell to 0.55.

Miners’ correlation trends with gold are a crucial factor for investors to consider since gold is the most prominent of the four precious metals. The changes in gold impact the other three precious metals as well as mining stocks.

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