QUAL vs XLY: Correlation & Overlap
iShares MSCI USA Quality Factor ETF (QUAL) and Consumer Discretionary Select Sector SPDR Fund (XLY) show a very strong relationship: their 3-year correlation of weekly returns is 0.81. The two funds also share 9.6% of their portfolios by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are QUAL and XLY?
Over the past 3 years, QUAL and XLY moved with a correlation of 0.81, which is very strong, meaning they move nearly in lockstep. The relationship has been stable: the 1-year correlation (0.78) sits close to the 3-year figure. Over 5 years the correlation is 0.85, and the annualized covariance of weekly returns is 223.3 %².
By 3-year correlation, XLY places #24 of the 106 assets tracked against QUAL. Their recent paths diverged sharply: over the last 12 months QUAL outperformed by 19.8 percentage points (+19.7% for QUAL against -0.1% for XLY). The rolling one-year correlation stayed in a tight band between 0.76 and 0.88 over the past three years, which points to a structural rather than episodic relationship.
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 XLY: side by side
| QUAL (iShares MSCI USA Quality Factor ETF) | XLY (Consumer Discretionary Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +19.7% | -0.1% |
| 5-year return | +68.0% | +31.8% |
| Volatility (ann.) | 14.0% | 19.7% |
| Beta vs S&P 500 | 0.93 | 1.15 |
| Max drawdown (3Y) | -18.0% | -26.0% |
| Dividend yield | 0.86% | 0.78% |
| Expense ratio | 0.15% | 0.08% |
| Assets under management | $46.5B | $22.5B |
| 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. XLY is a Consumer Cyclical fund from State Street Investment Management: $22.5B under management, 47 holdings, a 0.08% expense ratio, a 0.78% trailing dividend yield.
Portfolio overlap between QUAL and XLY
The two portfolios are largely distinct, with 11 holdings in common adding up to 9.6% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
| Common holding | Weight in QUAL | Weight in XLY |
|---|---|---|
| TJX | 3.40% | 3.55% |
| ROST | 1.44% | 1.90% |
| CMG | 0.97% | 1.19% |
| GRMN | 0.88% | 1.18% |
| WSM | 0.71% | 0.70% |
| ULTA | 0.51% | 0.59% |
| PHM | 0.42% | 0.62% |
| NVR | 0.36% | 0.43% |
| BBY | 0.34% | 0.43% |
| DECK | 0.31% | 0.32% |
| LULU | 0.24% | 0.30% |
Largest positions held only by QUAL: MSFT (7.51%), AAPL (6.62%), NVDA (6.00%), META (3.75%), LLY (3.72%). Only by XLY: AMZN (24.32%), TSLA (16.18%), HD (5.54%), MCD (4.11%), BKNG (4.04%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-08-26. Top 11 common positions shown.
Year-by-year returns
| Year | QUAL | XLY |
|---|---|---|
| 2022 | -20.5% | -36.3% |
| 2023 | +30.9% | +39.6% |
| 2024 | +22.3% | +26.5% |
| 2025 | +12.7% | +7.4% |
| 2026 | +13.5% | -2.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are QUAL and XLY good diversifiers for each other?
Not really. At 0.81, the two trade almost as one position, and owning both buys little extra protection.
FAQ
What is the correlation between QUAL and XLY?
As of 2026-08-27, the correlation of weekly returns between QUAL and XLY is 0.81 over 3 years, 0.78 over 1 year and 0.85 over 5 years.
Is XLY a good diversifier for QUAL?
Not really. At 0.81, the two trade almost as one position, and owning both buys little extra protection.
How much do QUAL and XLY overlap?
The two funds share 11 holdings amounting to 9.6% of weight, per issuer portfolio files dated 2026-08-26.
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Related comparisons
Hubs: QUAL correlations · XLY correlations
