EEM vs XLF: Correlation & Overlap
Measured on weekly returns over the past three years, iShares MSCI Emerging Markets ETF (EEM) and Financial Select Sector SPDR Fund (XLF) carry a correlation of 0.37, a moderate link. Looking through to holdings, 0% of the two portfolios is the same by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are EEM and XLF?
On 3 years of weekly data the EEM/XLF correlation comes out at 0.37, moderate. The link has loosened recently: the 1-year correlation (0.21) runs below the 3-year figure (0.37). The 5-year figure is 0.46, and annualized covariance runs at 108.9 %².
Within EEM's tracked universe of 67 assets, XLF comes in at #52 by 3-year correlation. The last year tells two different stories: EEM led by 28.8 percentage points, +38.1% for EEM against +9.3% for XLF. The relationship is regime-dependent: the rolling one-year correlation swung between 0.13 and 0.66 over the past three years, so this pair behaves very differently depending on the market environment.
How is this computed?
Pearson correlation on weekly returns: ρ(A,B) = cov(rA, rB) / (σA · σB), over windows of 52, 156 and 260 weeks. Covariance is annualized (×52) and expressed in %². Full definitions on the methodology page.
EEM vs XLF: side by side
| EEM (iShares MSCI Emerging Markets ETF) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +38.1% | +9.3% |
| 5-year return | +47.1% | +64.2% |
| Volatility (ann.) | 18.0% | 16.2% |
| Beta vs S&P 500 | 0.85 | 0.84 |
| Max drawdown (3Y) | -17.3% | -15.5% |
| Dividend yield | 1.73% | 1.42% |
| Expense ratio | 0.72% | 0.08% |
| Assets under management | $29.2B | $57.9B |
| Sector / category | ETF · International | Sector ETF |
On the fund side, EEM sits in the Diversified Emerging Mkts category at iShares, with $29.2B under management, 968 holdings, a 0.72% expense ratio, a 1.73% trailing dividend yield. XLF is a Financial fund from State Street Investment Management: $57.9B under management, 77 holdings, a 0.08% expense ratio, a 1.42% trailing dividend yield.
Portfolio overlap between EEM and XLF
The two portfolios are largely distinct, with 0 holdings in common adding up to 0% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
Largest positions held only by EEM: 2330 (15.14%), 005930 (7.15%), 000660 (5.45%), 700 (2.83%), 9988 (2.02%). Only by XLF: JPM (11.61%), BRK.B (11.25%), V (7.74%), MA (5.87%), BAC (4.94%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26.
Year-by-year returns
| Year | EEM | XLF |
|---|---|---|
| 2022 | -20.6% | -10.6% |
| 2023 | +8.9% | +12.0% |
| 2024 | +6.5% | +30.6% |
| 2025 | +34.0% | +14.9% |
| 2026 | +24.2% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are EEM and XLF good diversifiers for each other?
A fair diversifier. At 0.37, enough of each asset's movement is its own that the pair has smoothed outcomes historically.
FAQ
What is the correlation between EEM and XLF?
As of 2026-08-27, the correlation of weekly returns between EEM and XLF is 0.37 over 3 years, 0.21 over 1 year and 0.46 over 5 years.
Is XLF a good diversifier for EEM?
A fair diversifier. At 0.37, enough of each asset's movement is its own that the pair has smoothed outcomes historically.
How much do EEM and XLF overlap?
Per the issuers' own portfolio disclosures (2026-08-26), the overlap is 0% by weight over 0 common positions.
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Hubs: EEM correlations · XLF correlations
