IWM vs XLF: Correlation & Overlap
How closely do iShares Russell 2000 ETF (IWM) and Financial Select Sector SPDR Fund (XLF) trade together? Their weekly returns over three years give a correlation of 0.72, which is strong. 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 IWM and XLF?
Across a 3-year window, the weekly returns of IWM and XLF correlate at 0.72, strong. Lately the two have drifted apart, with the 1-year correlation at 0.52 versus 0.72 over 3 years. Stretching to 5 years gives 0.77, with an annualized covariance of 232.2 %².
By 3-year correlation, XLF places #36 of the 320 assets tracked against IWM. Their recent paths diverged sharply: over the last 12 months IWM outperformed by 19.1 percentage points (+28.4% for IWM against +9.3% for XLF). On a rolling one-year basis the correlation drifted between 0.53 and 0.88, a moderate band.
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.
IWM vs XLF: side by side
| IWM (iShares Russell 2000 ETF) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +28.4% | +9.3% |
| 5-year return | +41.5% | +64.2% |
| Volatility (ann.) | 19.8% | 16.2% |
| Beta vs S&P 500 | 1.06 | 0.84 |
| Max drawdown (3Y) | -27.5% | -15.5% |
| Dividend yield | 0.91% | 1.42% |
| Expense ratio | 0.19% | 0.08% |
| Assets under management | $80.1B | $57.9B |
| Sector / category | ETF · US Small & Mid Cap | Sector ETF |
IWM is a Small Blend fund from iShares: $80.1B under management, 1757 holdings, a 0.19% expense ratio, a 0.91% 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 IWM 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 IWM: MOGA (0.35%), UMBF (0.34%), CYTK (0.33%), GKOS (0.33%), EAT (0.33%). 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 | IWM | XLF |
|---|---|---|
| 2022 | -20.5% | -10.6% |
| 2023 | +16.8% | +12.0% |
| 2024 | +11.4% | +30.6% |
| 2025 | +12.7% | +14.9% |
| 2026 | +22.3% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are IWM and XLF good diversifiers for each other?
To a limited degree. At 0.72 the two still catch most of the same waves, so the pair smooths returns a little without insulating either from a shared selloff.
FAQ
What is the correlation between IWM and XLF?
Using weekly returns as of 2026-08-27: 0.72 over 3 years, with 0.52 over the last year and 0.77 over 5 years.
Is XLF a good diversifier for IWM?
To a limited degree. At 0.72 the two still catch most of the same waves, so the pair smooths returns a little without insulating either from a shared selloff.
How much do IWM and XLF overlap?
The two funds share 0 holdings amounting to 0% of weight, per issuer portfolio files dated 2026-08-26.
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Hubs: IWM correlations · XLF correlations
