QUAL vs XLC: Correlation & Overlap
How closely do iShares MSCI USA Quality Factor ETF (QUAL) and Communication Services Select Sector SPDR Fund (XLC) trade together? Their weekly returns over three years give a correlation of 0.79, which is strong. The two funds also share 9.8% of their portfolios by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are QUAL and XLC?
Over the past 3 years, QUAL and XLC moved with a correlation of 0.79, which is strong. Lately the two have drifted apart, with the 1-year correlation at 0.68 versus 0.79 over 3 years. Over 5 years the correlation is 0.82, and the annualized covariance of weekly returns is 176.4 %².
Among the 106 assets we track against QUAL, XLC ranks #28 by 3-year correlation. Their recent paths diverged sharply: over the last 12 months QUAL outperformed by 18.2 percentage points (+19.7% for QUAL against +1.5% for XLC). The rolling one-year correlation moved between 0.63 and 0.91 over the past three years, a moderate range.
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 XLC: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLC (Communication Services Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | +1.5% |
| 5-year return | +68.0% | +37.5% |
| Volatility (ann.) | 14.0% | 16.0% |
| Beta vs S&P 500 | 0.93 | 0.90 |
| Max drawdown (3Y) | -18.0% | -18.0% |
| Dividend yield | 0.86% | 1.32% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $21.7B |
| 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. On the fund side, XLC sits in the Communications category at State Street Investment Management, with $21.7B under management, 24 holdings, a 0.08% expense ratio, a 1.32% trailing dividend yield.
Portfolio overlap between QUAL and XLC
The two portfolios are largely distinct, with 6 holdings in common adding up to 9.8% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
| Common holding | Weight in QUAL | Weight in XLC |
|---|---|---|
| META | 3.75% | 16.73% |
| GOOGL | 1.93% | 10.29% |
| NFLX | 1.91% | 4.84% |
| GOOG | 1.52% | 8.22% |
| APP | 0.57% | 1.30% |
| OMC | 0.09% | 4.52% |
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), LLY (3.72%), LRCX (3.66%). Only by XLC: T (5.20%), VZ (4.99%), CMCSA (4.93%), DIS (4.88%), WBD (4.65%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 6 common positions shown.
Year-by-year returns
| Year | QUAL | XLC |
|---|---|---|
| 2022 | -20.5% | -37.6% |
| 2023 | +30.9% | +52.8% |
| 2024 | +22.3% | +34.7% |
| 2025 | +12.7% | +23.1% |
| 2026 | +13.5% | -4.8% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLC good diversifiers for each other?
Only partially. A correlation of 0.79 means QUAL and XLC share most of their swings. Pairing them dampens volatility somewhat, but it will not protect against a common drawdown.
FAQ
What is the correlation between QUAL and XLC?
The QUAL/XLC correlation stands at 0.79 on a 3-year window (1 year: 0.68, 5 years: 0.82), computed from weekly returns as of 2026-08-27.
Is XLC a good diversifier for QUAL?
Only partially. A correlation of 0.79 means QUAL and XLC share most of their swings. Pairing them dampens volatility somewhat, but it will not protect against a common drawdown.
How much do QUAL and XLC overlap?
Per the issuers' own portfolio disclosures (2026-08-26), the overlap is 9.8% by weight over 6 common positions.
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Related comparisons
Hubs: QUAL correlations · XLC correlations
