VNQ vs. XLY

Last updated Jun 12, 2026

VNQ (Vanguard Real Estate ETF) and XLY (Consumer Discretionary Select Sector SPDR Fund) are both exchange-traded funds - VNQ is a REIT fund tracking the MSCI US Investable Market Real Estate 25/50 Index, while XLY is a Consumer Discretionary Equities fund tracking the Consumer Discretionary Select Sector Index. Both are passively managed. Over the past 10 years, VNQ returned 5.53%/yr vs 12.72%/yr for XLY. A 0.60 correlation means they provide meaningful diversification when combined. Both charge a 0.13% expense ratio.

Performance

VNQ vs. XLY - Performance Comparison

The chart below illustrates the hypothetical performance of a $10,000 investment in Vanguard Real Estate ETF (VNQ) and Consumer Discretionary Select Sector SPDR Fund (XLY). The values are adjusted to include any dividend payments, if applicable.

Returns By Period

In the year-to-date period, VNQ achieves a 11.49% return, which is significantly higher than XLY's -2.41% return. Over the past 10 years, VNQ has underperformed XLY with an annualized return of 5.53%, while XLY has yielded a comparatively higher 12.72% annualized return.

VNQ

• 1D: -0.07%
• 1M: 0.95%
• YTD: 11.49%
• 6M: 11.16%
• 1Y: 12.43%
• 3Y*: 10.04%
• 5Y*: 2.36%
• 10Y*: 5.53%

XLY

• 1D: 2.48%
• 1M: -1.68%
• YTD: -2.41%
• 6M: -2.84%
• 1Y: 9.18%
• 3Y*: 13.28%
• 5Y*: 6.94%
• 10Y*: 12.72%

*Multi-year figures are annualized to reflect compound growth (CAGR)

VNQ vs. XLY - Yearly Performance Comparison

	2026 (YTD)	2025	2024	2023	2022	2021	2020	2019	2018	2017
VNQ Vanguard Real Estate ETF	11.49%	3.24%	4.81%	11.85%	-26.25%	40.54%	-4.61%	28.91%	-6.03%	4.90%
XLY Consumer Discretionary Select Sector SPDR Fund	-2.41%	7.37%	26.51%	39.64%	-36.27%	27.93%	29.63%	28.39%	1.58%	22.82%

Correlation

The correlation between VNQ and XLY is 0.37, which is low. Their price movements are largely independent, making them effective diversification partners.

	Correlation
Correlation (1Y) Calculated over the trailing 1-year period	0.37
Correlation (3Y) Calculated over the trailing 3-year period	0.45
Correlation (5Y) Calculated over the trailing 5-year period	0.53
Correlation (10Y) Calculated over the trailing 10-year period	0.50
Correlation (All Time) Calculated using the full available price history since Sep 29, 2004	0.60

Over the past year, the correlation between VNQ and XLY has dropped to 0.37 - well below their long-term average of 0.60, suggesting their price drivers have been diverging.

VNQ vs. XLY - Sectors Allocation Comparison

Sectors	VNQ	XLY
Real Estate	97.3%	-
Basic Materials	1.1%	-
Communication Services	0.6%	1.3%
Technology	0.3%	0.9%
Energy	0.1%	-
Financial Services	0.1%	-
Industrials	0.0%	0.1%
Consumer Cyclical	-	97.6%
Consumer Defensive	-	-
Healthcare	-	-
Utilities	-	-

Return for Risk

VNQ vs. XLY — Risk / Return Rank

Compare risk-adjusted metric ranks to identify better-performing investments over the past 12 months.

VNQ

VNQ Risk / Return Rank: 32
VNQ Sharpe Ratio Rank: 31
VNQ Sortino Ratio Rank: 29
VNQ Omega Ratio Rank: 29
VNQ Calmar Ratio Rank: 36
VNQ Martin Ratio Rank: 36

XLY

XLY Risk / Return Rank: 19
XLY Sharpe Ratio Rank: 19
XLY Sortino Ratio Rank: 19
XLY Omega Ratio Rank: 18
XLY Calmar Ratio Rank: 19
XLY Martin Ratio Rank: 20

The rank (0–100) shows how this investment's returns compare to the risk taken. Higher = better. Based on the past 12 months of data, combining Sharpe, Sortino, and other metrics used by quantitative funds and institutional investors.

VNQ vs. XLY - Risk-Adjusted Trends Comparison

This table presents a comparison of risk-adjusted performance metrics for Vanguard Real Estate ETF (VNQ) and Consumer Discretionary Select Sector SPDR Fund (XLY). Risk-adjusted metrics are performance indicators that assess an investment's returns in relation to its risk, enabling a more accurate comparison of different investment options.

Values are calculated on a 1-year rolling basis and updated daily. Risk-adjusted metrics are more stable over longer periods — use the period switch above to explore them.

	VNQ	XLY	Difference
Sharpe ratio: Return per unit of total volatility	0.92	0.50	+0.42
Sortino ratio: Return per unit of downside risk	1.35	0.83	+0.51
Omega ratio: Gain probability vs. loss probability	1.17	1.10	+0.07
Calmar ratio: Return relative to maximum drawdown	1.50	0.62	+0.88
Martin ratio: Return relative to average drawdown	4.71	1.89	+2.81

VNQ vs. XLY - Sharpe Ratio Comparison

The current VNQ Sharpe Ratio is 0.92, which is higher than the XLY Sharpe Ratio of 0.50. The chart below compares the historical Sharpe Ratios of VNQ and XLY, calculated using daily returns over the previous 12 months. A higher Sharpe Ratio indicates better risk-adjusted performance relative to the risk-free rate.

Drawdowns

VNQ vs. XLY - Drawdown Comparison

The maximum VNQ drawdown since its inception was -73.07%, which is greater than XLY's maximum drawdown of -59.05%. Use the drawdown chart below to compare losses from any high point for VNQ and XLY.

Drawdown Indicators

	VNQ	XLY	Difference
Max Drawdown Largest peak-to-trough decline	-73.07%	-59.05%	-14.02%
Max Drawdown (1Y) Largest decline over 1 year	-8.34%	-14.98%	+6.64%
Max Drawdown (3Y) Largest decline over 3 years	-17.46%	-26.01%	+8.55%
Max Drawdown (5Y) Largest decline over 5 years	-34.48%	-39.67%	+5.19%
Max Drawdown (10Y) Largest decline over 10 years	-42.40%	-39.67%	-2.73%
Current Drawdown Current decline from peak	-0.49%	-6.41%	+5.92%
Average Drawdown Average peak-to-trough decline	-13.61%	-9.55%	-4.06%
Ulcer Index Depth and duration of drawdowns from previous peaks	2.65%	4.86%	-2.21%

Volatility

VNQ vs. XLY - Volatility Comparison

The current volatility for Vanguard Real Estate ETF (VNQ) is 4.74%, while Consumer Discretionary Select Sector SPDR Fund (XLY) has a volatility of 6.20%. This indicates that VNQ experiences smaller price fluctuations and is considered to be less risky than XLY based on this measure. The chart below showcases a comparison of their rolling one-month volatility.

Volatility by Period

	VNQ	XLY	Difference
Volatility (1M) Calculated over the trailing 1-month period	4.74%	6.20%	-1.46%
Volatility (6M) Calculated over the trailing 6-month period	9.74%	13.52%	-3.78%
Volatility (1Y) Calculated over the trailing 1-year period	13.52%	18.29%	-4.77%
Volatility (5Y) Calculated over the trailing 5-year period, annualized	18.85%	23.84%	-4.99%
Volatility (10Y) Calculated over the trailing 10-year period, annualized	20.72%	22.08%	-1.36%

VNQ vs. XLY - Expense Ratio Comparison

Both VNQ and XLY have an expense ratio of 0.13%, making them cost-effective options compared to the broader market, where average expense ratios typically range from 0.3% to 0.9%.

Dividends

VNQ vs. XLY - Dividend Comparison

VNQ's dividend yield for the trailing twelve months is around 3.57%, more than XLY's 0.77% yield.

Position	TTM	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
VNQ Vanguard Real Estate ETF	3.57%	3.92%	3.85%	3.95%	3.91%	2.56%	3.93%	3.39%	4.74%	4.23%	4.82%	3.92%
XLY Consumer Discretionary Select Sector SPDR Fund	0.77%	0.79%	0.72%	0.78%	1.00%	0.53%	0.82%	1.28%	1.34%	1.20%	1.71%	1.43%

Frequently Asked Questions

Can I hold both VNQ and XLY in my portfolio?

VNQ and XLY have a correlation of 0.37, meaning they provide meaningful diversification benefit when combined. Depending on your allocation goals, holding both could reduce overall portfolio risk.

Which is riskier, VNQ or XLY?

XLY has higher volatility (6.20%) compared to VNQ (4.74%). In terms of maximum drawdown, VNQ dropped -73.07% vs XLY's -59.05%.

Which ETF is better, VNQ or XLY?

On 10-year performance, XLY leads with 12.72% vs 5.53% for VNQ. Both ETFs have the same 0.13% expense ratio. On volatility, VNQ has been the lower-risk option at 4.74%. The better choice depends on whether you care most about return, fees, risk, or income.

Which ETF has performed better, VNQ or XLY?

Over the 10-year period, XLY has performed better with a 12.72% return vs 5.53%. Past performance does not guarantee future results, so compare this with risk, fees, and fund exposure.

Which ETF is cheaper, VNQ or XLY?

VNQ and XLY have the same expense ratio: 0.13% per year.

Which ETF pays a higher dividend yield, VNQ or XLY?

VNQ has the higher dividend yield at 3.57%, compared with 0.77% for XLY.

What is the main difference between VNQ and XLY?

VNQ is categorized as REIT, while XLY is Consumer Discretionary Equities. VNQ tracks MSCI US Investable Market Real Estate 25/50 Index, while XLY tracks Consumer Discretionary Select Sector Index. They also come from different issuers: Vanguard and State Street.

Which has better risk-adjusted returns?

VNQ currently has the higher Sharpe Ratio (0.92 vs 0.50), meaning it's delivered slightly more return per unit of risk over the trailing 12 months. However, this ranking shifts over time - use the Risk/Return Score above for a more comprehensive view that combines Sharpe, Sortino, and other measures used by quantitative funds.