QUAL vs XLP: Correlation & Overlap
How closely do iShares MSCI USA Quality Factor ETF (QUAL) and Consumer Staples Select Sector SPDR Fund (XLP) trade together? Their weekly returns over three years give a correlation of 0.37, which is moderate. By holdings, the two funds overlap 4.3% by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are QUAL and XLP?
On 3 years of weekly data the QUAL/XLP correlation comes out at 0.37, moderate. The link has loosened recently: the 1-year correlation (0.20) runs below the 3-year figure (0.37). The 5-year figure is 0.56, and annualized covariance runs at 58.2 %².
Among the 106 assets we track against QUAL, XLP ranks #91 by 3-year correlation. On 12-month performance QUAL holds a 11.4-point edge, +19.7% against +8.3%. On a rolling one-year basis the correlation drifted between 0.21 and 0.65, 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 XLP: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLP (Consumer Staples Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | +8.3% |
| 5-year return | +68.0% | +34.7% |
| Volatility (ann.) | 14.0% | 11.1% |
| Beta vs S&P 500 | 0.93 | 0.23 |
| Max drawdown (3Y) | -18.0% | -9.7% |
| Dividend yield | 0.86% | 2.58% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $14.6B |
| Sector / category | ETF · US Style | Sector ETF |
On the fund side, QUAL sits in the Large Blend category at iShares, with $46.5B under management, 123 holdings, a 0.15% expense ratio, a 0.86% trailing dividend yield. On the fund side, XLP sits in the Consumer Defensive category at State Street Investment Management, with $14.6B under management, 35 holdings, a 0.08% expense ratio, a 2.58% trailing dividend yield.
Portfolio overlap between QUAL and XLP
The two portfolios are largely distinct, with 9 holdings in common adding up to 4.3% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
| Common holding | Weight in QUAL | Weight in XLP |
|---|---|---|
| COST | 1.09% | 8.92% |
| WMT | 0.91% | 9.62% |
| KO | 0.82% | 7.34% |
| PG | 0.81% | 7.10% |
| PEP | 0.36% | 4.39% |
| MNST | 0.17% | 4.28% |
| HSY | 0.06% | 1.72% |
| CHD | 0.05% | 1.53% |
| MKC | 0.03% | 0.88% |
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), META (3.75%), LLY (3.72%). Only by XLP: PM (6.36%), TGT (4.67%), CL (4.56%), MDLZ (4.37%), MO (4.21%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 9 common positions shown.
Year-by-year returns
| Year | QUAL | XLP |
|---|---|---|
| 2022 | -20.5% | -0.8% |
| 2023 | +30.9% | -0.8% |
| 2024 | +22.3% | +12.2% |
| 2025 | +12.7% | +1.5% |
| 2026 | +13.5% | +10.9% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLP good diversifiers for each other?
Yes, to a useful degree: a correlation of 0.37 leaves real independence between the two, which historically damped combined volatility.
FAQ
What is the correlation between QUAL and XLP?
As of 2026-08-27, the correlation of weekly returns between QUAL and XLP is 0.37 over 3 years, 0.20 over 1 year and 0.56 over 5 years.
Is XLP a good diversifier for QUAL?
Yes, to a useful degree: a correlation of 0.37 leaves real independence between the two, which historically damped combined volatility.
How much do QUAL and XLP overlap?
4.3% by weight, across 9 common holdings, based on issuer-disclosed portfolios as of 2026-08-26.
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Hubs: QUAL correlations · XLP correlations
