QUAL vs XLE: Correlation & Overlap
How closely do iShares MSCI USA Quality Factor ETF (QUAL) and Energy Select Sector SPDR Fund (XLE) trade together? Their weekly returns over three years give a correlation of 0.16, which is weak. Looking through to holdings, 3.3% 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 QUAL and XLE?
On 3 years of weekly data the QUAL/XLE correlation comes out at 0.16, weak. The link has loosened recently: the 1-year correlation (-0.35) runs below the 3-year figure (0.16). The 5-year figure is 0.25, and annualized covariance runs at 51.0 %².
By 3-year correlation, XLE places #96 of the 106 assets tracked against QUAL. Correlation aside, the last 12 months split them widely, with XLE ahead by 24.3 points (+19.7% versus +44.0%). The relationship is regime-dependent: the rolling one-year correlation swung between -0.35 and 0.52 over the past three years, so this pair behaves very differently depending on the market environment. One caveat on sizing: XLE is 1.7 times as volatile as the other leg, so an equal-dollar split is far from equal-risk.
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 XLE: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLE (Energy Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | +44.0% |
| 5-year return | +68.0% | +206.7% |
| Volatility (ann.) | 14.0% | 23.1% |
| Beta vs S&P 500 | 0.93 | 0.27 |
| Max drawdown (3Y) | -18.0% | -20.1% |
| Dividend yield | 0.86% | 2.55% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $39.2B |
| 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. XLE is an Equity Energy fund from State Street Investment Management: $39.2B under management, 22 holdings, a 0.08% expense ratio, a 2.55% trailing dividend yield.
Portfolio overlap between QUAL and XLE
The two portfolios are largely distinct: 3.3% of the funds' weight sits in the same underlying holdings (7 common positions). Correlation tells you they move together; overlap tells you why.
| Common holding | Weight in QUAL | Weight in XLE |
|---|---|---|
| XOM | 2.18% | 20.03% |
| EOG | 0.31% | 4.24% |
| SLB | 0.31% | 4.46% |
| DVN | 0.17% | 3.20% |
| TPL | 0.12% | 1.27% |
| HAL | 0.09% | 1.71% |
| EXE | 0.08% | 1.37% |
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), META (3.75%), LLY (3.72%). Only by XLE: CVX (14.84%), COP (6.30%), MPC (5.40%), PSX (5.37%), VLO (5.05%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 7 common positions shown.
Year-by-year returns
| Year | QUAL | XLE |
|---|---|---|
| 2022 | -20.5% | +64.3% |
| 2023 | +30.9% | -0.6% |
| 2024 | +22.3% | +5.6% |
| 2025 | +12.7% | +7.9% |
| 2026 | +13.5% | +41.2% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLE good diversifiers for each other?
By historical standards, yes. A correlation of 0.16 means the two rarely move for the same reasons.
FAQ
What is the correlation between QUAL and XLE?
The QUAL/XLE correlation stands at 0.16 on a 3-year window (1 year: -0.35, 5 years: 0.25), computed from weekly returns as of 2026-08-27.
Is XLE a good diversifier for QUAL?
By historical standards, yes. A correlation of 0.16 means the two rarely move for the same reasons.
How much do QUAL and XLE overlap?
Per the issuers' own portfolio disclosures (2026-08-26), the overlap is 3.3% by weight over 7 common positions.
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Hubs: QUAL correlations · XLE correlations
