RE: Gold Price & Junior CorrelationHello all,
I've come to inform you of my mistake in my correlation analysis. After reading your post, ilafalot, I went back to my correlation matrix in Bloomy and started adding more companies to see whether other juniors were correlated or not.
So ilafalot, while your instinct was correct, it was correct for the wrong reason... the issue wasn't one of sample size, but rather that one of the settings on my input page was set to "Percent" instead of "Value". It didn't seem like a big factor at first glance, but after changing the setting the results were completely transformed. I checked with someone from Bloomberg Help to make sure that I was using the right settings, and indeed this time they are.
I also ran time horizons of 1 and 2 years... I will post the 2-year results since it stands to reason that the longer the time horizon, the less that smaller company-specific factors will matter.
Here are the results: (the number is the correlation between the spot price of gold and each company)
Canaco: 0.631
Goldcorp: 0.736
Osisko: 0.810
Sabina: 0.633
Romarco: 0.752
The results are clearly much more intuitive and the correlations in all cases are quite high. I apologize for my incorrect post. Thanks for making me check!