VNQ vs XLY: Correlation & Overlap
Measured on weekly returns over the past three years, Vanguard Real Estate ETF (VNQ) and Consumer Discretionary Select Sector SPDR Fund (XLY) carry a correlation of 0.47, a moderate link. Looking through to holdings, 0% 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 VNQ and XLY?
Over the past 3 years, VNQ and XLY moved with a correlation of 0.47, which is moderate. The link has loosened recently: the 1-year correlation (0.25) runs below the 3-year figure (0.47). Over 5 years the correlation is 0.63, and the annualized covariance of weekly returns is 153.4 %².
Within VNQ's tracked universe of 149 assets, XLY comes in at #122 by 3-year correlation. Over the last 12 months VNQ came out ahead by 10.4 percentage points (+10.3% against -0.1%). Do not treat this figure as fixed: across three years the rolling one-year correlation ranged all the way from 0.26 to 0.83.
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 XLY: side by side
| VNQ (Vanguard Real Estate ETF) | XLY (Consumer Discretionary Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +10.3% | -0.1% |
| 5-year return | +9.5% | +31.8% |
| Volatility (ann.) | 16.6% | 19.7% |
| Beta vs S&P 500 | 0.59 | 1.15 |
| Max drawdown (3Y) | -17.5% | -26.0% |
| Dividend yield | 3.51% | 0.78% |
| Expense ratio | 0.13% | 0.08% |
| Assets under management | $73.1B | $22.5B |
| 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. 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 VNQ and XLY
The two portfolios are largely distinct. Weighing the shared positions, 0% of the two funds is identical, spread across 0 common holdings. That shared book is a large part of why the returns line up.
Largest positions held only by VNQ: VRTPX (14.54%), WELL (8.54%), PLD (7.04%), EQIX (5.25%), AMT (4.22%). 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 2026-07-31.
Year-by-year returns
| Year | VNQ | XLY |
|---|---|---|
| 2022 | -26.3% | -36.3% |
| 2023 | +11.9% | +39.6% |
| 2024 | +4.8% | +26.5% |
| 2025 | +3.2% | +7.4% |
| 2026 | +12.5% | -2.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are VNQ and XLY good diversifiers for each other?
Reasonably. At 0.47, VNQ and XLY keep a meaningful degree of independence, and combining them has historically reduced portfolio volatility.
FAQ
What is the correlation between VNQ and XLY?
As of 2026-08-27, the correlation of weekly returns between VNQ and XLY is 0.47 over 3 years, 0.25 over 1 year and 0.63 over 5 years.
Is XLY a good diversifier for VNQ?
Reasonably. At 0.47, VNQ and XLY keep a meaningful degree of independence, and combining them has historically reduced portfolio volatility.
How much do VNQ and XLY overlap?
The two funds share 0 holdings amounting to 0% of weight, per issuer portfolio files dated 2026-07-31.
Use this data
$ curl https://www.pairbook.io/api/v1/pairs/vnq-vs-xly.json
Markdown for the live badge, attribution link included:
[](https://www.pairbook.io/pair/vnq-vs-xly/)
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Related comparisons
Hubs: VNQ correlations · XLY correlations
