VNQ vs XLF: Correlation & Overlap
Vanguard Real Estate ETF (VNQ) and Financial Select Sector SPDR Fund (XLF) show a moderate relationship: their 3-year correlation of weekly returns is 0.59. By holdings, the two funds overlap 0% by weight.
Data as of 2026-08-27 · refreshed every trading day · weekly returns · methodology
How correlated are VNQ and XLF?
Over the past 3 years, VNQ and XLF moved with a correlation of 0.59, which is moderate. Lately the two have drifted apart, with the 1-year correlation at 0.35 versus 0.59 over 3 years. Over 5 years the correlation is 0.66, and the annualized covariance of weekly returns is 157.7 %².
Within VNQ's tracked universe of 149 assets, XLF comes in at #88 by 3-year correlation. Twelve-month performance is nearly a tie, at +10.3% for VNQ and +9.3% for XLF. Across three years, the rolling one-year figure varied moderately, from 0.37 to 0.82.
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.
VNQ vs XLF: side by side
| VNQ (Vanguard Real Estate ETF) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +10.3% | +9.3% |
| 5-year return | +9.5% | +64.2% |
| Volatility (ann.) | 16.6% | 16.2% |
| Beta vs S&P 500 | 0.59 | 0.84 |
| Max drawdown (3Y) | -17.5% | -15.5% |
| Dividend yield | 3.51% | 1.42% |
| Expense ratio | 0.13% | 0.08% |
| Assets under management | $73.1B | $57.9B |
| Sector / category | ETF · Real Estate | Sector ETF |
On the fund side, VNQ sits in the Real Estate category at Vanguard, with $73.1B under management, 140 holdings, a 0.13% expense ratio, a 3.51% 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 VNQ and XLF
The two portfolios are largely distinct, with 0 holdings in common adding up to 0% of fund weight. Where correlation shows the co-movement, the overlap shows its source.
Largest positions held only by VNQ: VRTPX (14.54%), WELL (8.54%), PLD (7.04%), EQIX (5.25%), AMT (4.22%). Only by XLF: JPM (11.61%), BRK.B (11.25%), V (7.74%), MA (5.87%), BAC (4.94%).
Overlap = sum of the smaller of the two weights across common holdings, from issuer disclosures as of 2026-07-31.
Year-by-year returns
| Year | VNQ | XLF |
|---|---|---|
| 2022 | -26.3% | -10.6% |
| 2023 | +11.9% | +12.0% |
| 2024 | +4.8% | +30.6% |
| 2025 | +3.2% | +14.9% |
| 2026 | +12.5% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are VNQ and XLF good diversifiers for each other?
Somewhat, no more. With 0.59 correlation, most large moves hit both names, and the diversification benefit stays modest.
FAQ
What is the correlation between VNQ and XLF?
As of 2026-08-27, the correlation of weekly returns between VNQ and XLF is 0.59 over 3 years, 0.35 over 1 year and 0.66 over 5 years.
Is XLF a good diversifier for VNQ?
Somewhat, no more. With 0.59 correlation, most large moves hit both names, and the diversification benefit stays modest.
How much do VNQ and XLF overlap?
The two funds share 0 holdings amounting to 0% of weight, per issuer portfolio files dated 2026-07-31.
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Related comparisons
Hubs: VNQ correlations · XLF correlations
