How the Correlation of Miners Moved amid Choppy Markets


May. 17 2018, Updated 9:02 a.m. ET

Correlation analysis

In this part of the series, we’ll look at the correlation between gold and four mining stocks: Franco-Nevada (FNV), Randgold Resources (GOLD), Yamana Gold (AUY), and Pan American Silver (PAAS). For the most part, mining stocks move in tandem with gold prices. Among these four miners, Pan American Silver demonstrated the highest correlation with gold this year, while Franco-Nevada displayed the lowest correlation.

Mining stocks are highly correlated with gold. The Gold Trust ETF (SGOL) and the Physical Silver Shares ETF (SIVR) tend to closely track gold and silver, respectively. These funds fell 1.6% and 1.6%, respectively, on May 15. 

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Correlation readings

Over the past three years, PAAS, AUY, and GOLD have seen declining correlations with gold, while FNV saw a mixed correlation to gold. FNV saw its three-year correlation with gold rise from 0.73 to a two-year correlation of 0.75 and then fall to a one-year correlation of 0.62. A correlation of 0.62 indicates that ~62.0% of the time during the last year, FNV has moved in the same direction as gold. The rest of the time, it hasn’t been correlated with gold.

The correlations of these miners tend to move with gold, as gold is the most crucial of the four precious metals. The movement in gold is critical in determining the changes of the other three metals. Fluctuations in gold also affect mining stocks and other funds.


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