QUAL vs XLB: Correlation & Overlap
Measured on weekly returns over the past three years, iShares MSCI USA Quality Factor ETF (QUAL) and Materials Select Sector SPDR Fund (XLB) carry a correlation of 0.65, a strong link. The two funds also share 1.7% of their portfolios by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are QUAL and XLB?
Across a 3-year window, the weekly returns of QUAL and XLB correlate at 0.65, strong. Lately the two have drifted apart, with the 1-year correlation at 0.46 versus 0.65 over 3 years. Stretching to 5 years gives 0.75, with an annualized covariance of 151.7 %².
Among the 106 assets we track against QUAL, XLB ranks #41 by 3-year correlation. Their 12-month results are close: +19.7% for QUAL against +17.6% for XLB. Across three years, the rolling one-year figure varied moderately, from 0.49 to 0.84.
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.
QUAL vs XLB: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLB (Materials Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | +17.6% |
| 5-year return | +68.0% | +36.9% |
| Volatility (ann.) | 14.0% | 16.7% |
| Beta vs S&P 500 | 0.93 | 0.72 |
| Max drawdown (3Y) | -18.0% | -23.2% |
| Dividend yield | 0.86% | 1.68% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $8.3B |
| Sector / category | ETF · US Style | Sector ETF |
QUAL is a Large Blend fund from iShares: $46.5B under management, 123 holdings, a 0.15% expense ratio, a 0.86% trailing dividend yield. XLB is a Natural Resources fund from State Street Investment Management: $8.3B under management, 26 holdings, a 0.08% expense ratio, a 1.68% trailing dividend yield.
Portfolio overlap between QUAL and XLB
The two portfolios are largely distinct. Weighing the shared positions, 1.7% of the two funds is identical, spread across 3 common holdings. That shared book is a large part of why the returns line up.
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), META (3.75%), LLY (3.72%). Only by XLB: NEM (8.02%), FCX (6.48%), CTVA (4.72%), APD (4.71%), NUE (4.28%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 3 common positions shown.
Year-by-year returns
| Year | QUAL | XLB |
|---|---|---|
| 2022 | -20.5% | -12.3% |
| 2023 | +30.9% | +12.5% |
| 2024 | +22.3% | +0.1% |
| 2025 | +12.7% | +9.9% |
| 2026 | +13.5% | +18.3% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLB good diversifiers for each other?
Somewhat, no more. With 0.65 correlation, most large moves hit both names, and the diversification benefit stays modest.
FAQ
What is the correlation between QUAL and XLB?
As of 2026-08-27, the correlation of weekly returns between QUAL and XLB is 0.65 over 3 years, 0.46 over 1 year and 0.75 over 5 years.
Is XLB a good diversifier for QUAL?
Somewhat, no more. With 0.65 correlation, most large moves hit both names, and the diversification benefit stays modest.
How much do QUAL and XLB overlap?
The two funds share 3 holdings amounting to 1.7% of weight, per issuer portfolio files dated 2026-08-26.
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Related comparisons
Hubs: QUAL correlations · XLB correlations
