VWO vs XLF: Correlation & Overlap
Vanguard FTSE Emerging Markets ETF (VWO) and Financial Select Sector SPDR Fund (XLF) show a moderate relationship: their 3-year correlation of weekly returns is 0.43. 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 VWO and XLF?
Over the past 3 years, VWO and XLF moved with a correlation of 0.43, which is moderate. The relationship has been stable: the 1-year correlation (0.35) sits close to the 3-year figure. Over 5 years the correlation is 0.48, and the annualized covariance of weekly returns is 106.0 %².
By 3-year correlation, XLF places #55 of the 73 assets tracked against VWO. On 12-month performance VWO holds a 12.3-point edge, +21.6% against +9.3%. This link changes with the market regime, having swung between 0.11 and 0.65 on a rolling one-year basis.
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.
VWO vs XLF: side by side
| VWO (Vanguard FTSE Emerging Markets ETF) | XLF (Financial Select Sector SPDR Fund) | |
|---|---|---|
| 1-year return | +21.6% | +9.3% |
| 5-year return | +38.2% | +64.2% |
| Volatility (ann.) | 15.2% | 16.2% |
| Beta vs S&P 500 | 0.75 | 0.84 |
| Max drawdown (3Y) | -17.4% | -15.5% |
| Dividend yield | 2.36% | 1.42% |
| Expense ratio | 0.06% | 0.08% |
| Assets under management | $162.0B | $57.9B |
| Sector / category | ETF · International | Sector ETF |
VWO, Vanguard's Diversified Emerging Mkts fund, carries $162.0B under management, 4113 holdings, a 0.06% expense ratio, a 2.36% 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 VWO and XLF
The two portfolios are largely distinct: 0% of the funds' weight sits in the same underlying holdings (0 common positions). Correlation tells you they move together; overlap tells you why.
Largest positions held only by VWO: 2330 (18.65%), 700 (3.97%), 9988 (2.90%), 2454 (1.62%), 939 (1.07%). 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 | VWO | XLF |
|---|---|---|
| 2022 | -18.0% | -10.6% |
| 2023 | +9.3% | +12.0% |
| 2024 | +10.6% | +30.6% |
| 2025 | +25.6% | +14.9% |
| 2026 | +13.6% | +6.6% |
Calendar-year price returns; the current year is year-to-date as of the data date above.
Are VWO and XLF good diversifiers for each other?
A fair diversifier. At 0.43, enough of each asset's movement is its own that the pair has smoothed outcomes historically.
FAQ
What is the correlation between VWO and XLF?
Using weekly returns as of 2026-08-27: 0.43 over 3 years, with 0.35 over the last year and 0.48 over 5 years.
Is XLF a good diversifier for VWO?
A fair diversifier. At 0.43, enough of each asset's movement is its own that the pair has smoothed outcomes historically.
How much do VWO 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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Hubs: VWO correlations · XLF correlations
