QUAL vs XLF: Correlation & Overlap
iShares MSCI USA Quality Factor ETF (QUAL) and Financial Select Sector SPDR Fund (XLF) show a strong relationship: their 3-year correlation of weekly returns is 0.74. By holdings, the two funds overlap 12.0% by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are QUAL and XLF?
Over the past 3 years, QUAL and XLF moved with a correlation of 0.74, which is strong. Little has changed lately, as the 1-year reading of 0.68 lands near the 3-year figure. Over 5 years the correlation is 0.76, and the annualized covariance of weekly returns is 167.4 %².
By 3-year correlation, XLF places #34 of the 106 assets tracked against QUAL. Over the last 12 months QUAL came out ahead by 10.4 percentage points (+19.7% against +9.3%). On a rolling one-year basis the correlation drifted between 0.45 and 0.86, 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.
QUAL vs XLF: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | +9.3% |
| 5-year return | +68.0% | +64.2% |
| Volatility (ann.) | 14.0% | 16.2% |
| Beta vs S&P 500 | 0.93 | 0.84 |
| Max drawdown (3Y) | -18.0% | -15.5% |
| Dividend yield | 0.86% | 1.42% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $57.9B |
| Sector / category | ETF · US Style | Sector ETF |
QUAL, iShares's Large Blend fund, carries $46.5B under management, 123 holdings, a 0.15% expense ratio, a 0.86% 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 QUAL and XLF
The two portfolios are largely distinct, with 24 holdings in common adding up to 12.0% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
| Common holding | Weight in QUAL | Weight in XLF |
|---|---|---|
| V | 3.26% | 7.74% |
| MA | 2.34% | 5.87% |
| BRK.B | 1.79% | 11.25% |
| SCHW | 0.50% | 2.17% |
| BLK | 0.50% | 2.06% |
| PGR | 0.41% | 1.58% |
| SPGI | 0.37% | 1.61% |
| CB | 0.33% | 1.51% |
| CME | 0.33% | 1.24% |
| MCO | 0.32% | 0.94% |
| MRSH | 0.28% | 1.13% |
| TRV | 0.24% | 0.96% |
| AMP | 0.24% | 0.61% |
| PYPL | 0.17% | 0.66% |
| AFL | 0.15% | 0.65% |
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), META (3.75%), LLY (3.72%). Only by XLF: JPM (11.61%), BAC (4.94%), GS (3.73%), WFC (3.17%), MS (3.12%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 15 common positions shown.
Year-by-year returns
| Year | QUAL | XLF |
|---|---|---|
| 2022 | -20.5% | -10.6% |
| 2023 | +30.9% | +12.0% |
| 2024 | +22.3% | +30.6% |
| 2025 | +12.7% | +14.9% |
| 2026 | +13.5% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLF good diversifiers for each other?
Only partially. A correlation of 0.74 means QUAL and XLF 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 XLF?
Using weekly returns as of 2026-08-27: 0.74 over 3 years, with 0.68 over the last year and 0.76 over 5 years.
Is XLF a good diversifier for QUAL?
Only partially. A correlation of 0.74 means QUAL and XLF share most of their swings. Pairing them dampens volatility somewhat, but it will not protect against a common drawdown.
How much do QUAL and XLF overlap?
12.0% by weight, across 24 common holdings, based on issuer-disclosed portfolios as of 2026-08-26.
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Hubs: QUAL correlations · XLF correlations
