MS vs XLF: Correlation
Measured on weekly returns over the past three years, Morgan Stanley (MS) and Financial Select Sector SPDR Fund (XLF) carry a correlation of 0.83, a very strong link.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are MS and XLF?
Across a 3-year window, the weekly returns of MS and XLF correlate at 0.83, very strong, meaning they move nearly in lockstep. The link has loosened recently: the 1-year correlation (0.67) runs below the 3-year figure (0.83). Stretching to 5 years gives 0.81, with an annualized covariance of 378.7 %².
XLF is one of the assets that tracks MS most closely: it ranks #2 out of the 46 assets we track against MS. The last year tells two different stories: MS led by 37.8 percentage points, +47.1% for MS against +9.3% for XLF. The link looks structural: the rolling one-year correlation barely moved, holding between 0.67 and 0.91. Note the risk asymmetry: MS runs 1.7 times the annualized volatility of the other leg, so equal-weighting the two is not an equal-risk position.
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.
MS vs XLF: side by side
| MS (Morgan Stanley) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +47.1% | +9.3% |
| 5-year return | +142.0% | +64.2% |
| Volatility (ann.) | 28.3% | 16.2% |
| Beta vs S&P 500 | 1.43 | 0.84 |
| Max drawdown (3Y) | -29.2% | -15.5% |
| Market cap | $337.5B | – |
| P/E (trailing) | 17.4 | – |
| Dividend yield | 1.94% | 1.42% |
| Expense ratio | – | 0.08% |
| Assets under management | – | $57.9B |
| Sector / category | Financials | Sector ETF |
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.
Year-by-year returns
| Year | MS | XLF |
|---|---|---|
| 2022 | -10.3% | -10.6% |
| 2023 | +13.9% | +12.0% |
| 2024 | +39.7% | +30.6% |
| 2025 | +45.2% | +14.9% |
| 2026 | +23.0% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Fund exposure
MS represents 3.12% of XLF's portfolio, so part of any move in XLF is MS itself, and the correlation between them is partly mechanical.
Are MS and XLF good diversifiers for each other?
No. With a correlation of 0.83, MS and XLF move nearly in lockstep, so holding both adds very little diversification.
FAQ
What is the correlation between MS and XLF?
The MS/XLF correlation stands at 0.83 on a 3-year window (1 year: 0.67, 5 years: 0.81), computed from weekly returns as of 2026-08-27.
Is XLF a good diversifier for MS?
No. With a correlation of 0.83, MS and XLF move nearly in lockstep, so holding both adds very little diversification.
What does a correlation of 0.83 mean?
On the −1 to +1 scale, 0.83 describes how much the two returns move together: +1 is lockstep, 0 is independence, negative values mean opposite directions. It says nothing about which performed better.
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Hubs: MS correlations · XLF correlations
