VTWO vs. XLF

Last updated Jun 14, 2026

VTWO (Vanguard Russell 2000 ETF) and XLF (State Street Financial Select Sector SPDR ETF) are both exchange-traded funds - VTWO is a Small Cap Blend Equities fund tracking the Russell 2000 Index, while XLF is a Financials Equities fund tracking the Financial Select Sector Index. Both are passively managed. Over the past 10 years, VTWO returned 11.41%/yr vs 13.33%/yr for XLF. A 0.75 correlation means they provide meaningful diversification when combined. VTWO charges 0.06%/yr vs 0.08%/yr for XLF.

Performance

VTWO vs. XLF - Performance Comparison

The chart below illustrates the hypothetical performance of a $10,000 investment in Vanguard Russell 2000 ETF (VTWO) and State Street Financial Select Sector SPDR ETF (XLF). The values are adjusted to include any dividend payments, if applicable.

Returns By Period

In the year-to-date period, VTWO achieves a 19.26% return, which is significantly higher than XLF's -2.11% return. Over the past 10 years, VTWO has underperformed XLF with an annualized return of 11.41%, while XLF has yielded a comparatively higher 13.33% annualized return.

VTWO

• 1D: 0.86%
• 1M: 5.50%
• YTD: 19.26%
• 6M: 16.09%
• 1Y: 42.05%
• 3Y*: 17.46%
• 5Y*: 6.23%
• 10Y*: 11.41%

XLF

• 1D: 1.37%
• 1M: 4.38%
• YTD: -2.11%
• 6M: -2.09%
• 1Y: 8.41%
• 3Y*: 18.86%
• 5Y*: 9.15%
• 10Y*: 13.33%

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

VTWO vs. XLF - Yearly Performance Comparison

	2026 (YTD)	2025	2024	2023	2022	2021	2020	2019	2018	2017
VTWO Vanguard Russell 2000 ETF	19.26%	12.90%	11.55%	17.08%	-20.49%	14.79%	20.22%	25.81%	-11.15%	14.69%
XLF State Street Financial Select Sector SPDR ETF	-2.11%	14.90%	30.56%	12.03%	-10.59%	34.80%	-1.74%	31.88%	-13.06%	22.00%

Correlation

The correlation between VTWO and XLF is 0.62, which is moderate. They share some common price drivers but move independently often enough to provide real diversification benefit when combined.

	Correlation
Correlation (1Y) Calculated over the trailing 1-year period	0.62
Correlation (3Y) Calculated over the trailing 3-year period	0.68
Correlation (5Y) Calculated over the trailing 5-year period	0.74
Correlation (10Y) Calculated over the trailing 10-year period	0.73
Correlation (All Time) Calculated using the full available price history since Sep 22, 2010	0.75

The correlation between VTWO and XLF shifts across timeframes, from 0.62 (1 year) to 0.75 (all time), reflecting how their relationship changes across market environments.

VTWO vs. XLF - Sectors Allocation Comparison

Sectors	VTWO	XLF
Industrials	17.7%	0.2%
Technology	17.0%	1.8%
Healthcare	16.5%	-
Financial Services	15.7%	98.0%
Consumer Cyclical	8.4%	-
Real Estate	6.1%	-
Energy	6.1%	-
Basic Materials	4.8%	-
Utilities	2.9%	-
Communication Services	2.4%	-
Consumer Defensive	2.4%	-

Return for Risk

VTWO vs. XLF — Risk / Return Rank

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

VTWO

VTWO Risk / Return Rank: 73
VTWO Sharpe Ratio Rank: 72
VTWO Sortino Ratio Rank: 71
VTWO Omega Ratio Rank: 63
VTWO Calmar Ratio Rank: 79
VTWO Martin Ratio Rank: 77

XLF

XLF Risk / Return Rank: 15
XLF Sharpe Ratio Rank: 17
XLF Sortino Ratio Rank: 15
XLF Omega Ratio Rank: 15
XLF Calmar Ratio Rank: 15
XLF Martin Ratio Rank: 15

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.

VTWO vs. XLF - Risk-Adjusted Trends Comparison

This table presents a comparison of risk-adjusted performance metrics for Vanguard Russell 2000 ETF (VTWO) and State Street Financial Select Sector SPDR ETF (XLF). 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.

	VTWO	XLF	Difference
Sharpe ratio: Return per unit of total volatility	2.02	0.42	+1.59
Sortino ratio: Return per unit of downside risk	2.77	0.67	+2.10
Omega ratio: Gain probability vs. loss probability	1.33	1.08	+0.25
Calmar ratio: Return relative to maximum drawdown	3.61	0.42	+3.19
Martin ratio: Return relative to average drawdown	12.79	1.08	+11.71

VTWO vs. XLF - Sharpe Ratio Comparison

The current VTWO Sharpe Ratio is 2.02, which is higher than the XLF Sharpe Ratio of 0.42. The chart below compares the historical Sharpe Ratios of VTWO and XLF, 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

VTWO vs. XLF - Drawdown Comparison

The maximum VTWO drawdown since its inception was -41.19%, smaller than the maximum XLF drawdown of -82.69%. Use the drawdown chart below to compare losses from any high point for VTWO and XLF.

Drawdown Indicators

	VTWO	XLF	Difference
Max Drawdown Largest peak-to-trough decline	-41.19%	-82.69%	+41.50%
Max Drawdown (1Y) Largest decline over 1 year	-10.99%	-14.79%	+3.80%
Max Drawdown (3Y) Largest decline over 3 years	-27.57%	-15.54%	-12.03%
Max Drawdown (5Y) Largest decline over 5 years	-31.88%	-25.81%	-6.07%
Max Drawdown (10Y) Largest decline over 10 years	-41.19%	-42.86%	+1.67%
Current Drawdown Current decline from peak	0.00%	-4.94%	+4.94%
Average Drawdown Average peak-to-trough decline	-8.38%	-20.01%	+11.63%
Ulcer Index Depth and duration of drawdowns from previous peaks	3.10%	5.76%	-2.66%

Volatility

VTWO vs. XLF - Volatility Comparison

Vanguard Russell 2000 ETF (VTWO) has a higher volatility of 7.15% compared to State Street Financial Select Sector SPDR ETF (XLF) at 4.23%. This indicates that VTWO's price experiences larger fluctuations and is considered to be riskier than XLF based on this measure. The chart below showcases a comparison of their rolling one-month volatility.

Volatility by Period

	VTWO	XLF	Difference
Volatility (1M) Calculated over the trailing 1-month period	7.15%	4.23%	+2.92%
Volatility (6M) Calculated over the trailing 6-month period	14.26%	11.26%	+3.00%
Volatility (1Y) Calculated over the trailing 1-year period	19.66%	14.69%	+4.97%
Volatility (5Y) Calculated over the trailing 5-year period, annualized	22.57%	18.66%	+3.91%
Volatility (10Y) Calculated over the trailing 10-year period, annualized	23.13%	22.17%	+0.96%

VTWO vs. XLF - Expense Ratio Comparison

VTWO has a 0.06% expense ratio, which is lower than XLF's 0.08% expense ratio. Despite the difference, both funds are considered low-cost compared to the broader market, where average expense ratios usually range from 0.3% to 0.9%.

Dividends

VTWO vs. XLF - Dividend Comparison

VTWO's dividend yield for the trailing twelve months is around 1.06%, less than XLF's 1.49% yield.

Position	TTM	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
VTWO Vanguard Russell 2000 ETF	1.06%	1.25%	1.21%	1.45%	1.48%	1.13%	0.92%	1.36%	1.41%	1.18%	1.27%	1.23%
XLF State Street Financial Select Sector SPDR ETF	1.49%	1.31%	1.42%	1.71%	2.04%	1.63%	2.03%	1.87%	2.08%	1.48%	21.10%	1.95%

Frequently Asked Questions

Can I hold both VTWO and XLF in my portfolio?

VTWO and XLF have a correlation of 0.62, meaning they provide meaningful diversification benefit when combined. Depending on your allocation goals, holding both could reduce overall portfolio risk.

Which is riskier, VTWO or XLF?

VTWO has higher volatility (7.15%) compared to XLF (4.23%). In terms of maximum drawdown, VTWO dropped -41.19% vs XLF's -82.69%.

Which ETF is better, VTWO or XLF?

On 10-year performance, XLF leads with 13.33% vs 11.41% for VTWO. On fees, VTWO is cheaper at 0.06% per year. On volatility, XLF has been the lower-risk option at 4.23%. The better choice depends on whether you care most about return, fees, risk, or income.

Which ETF has performed better, VTWO or XLF?

Over the 10-year period, XLF has performed better with a 13.33% return vs 11.41%. Past performance does not guarantee future results, so compare this with risk, fees, and fund exposure.

Which ETF is cheaper, VTWO or XLF?

VTWO is cheaper with a 0.06% expense ratio, compared with 0.08% for XLF.

Which ETF pays a higher dividend yield, VTWO or XLF?

XLF has the higher dividend yield at 1.49%, compared with 1.06% for VTWO.

What is the main difference between VTWO and XLF?

VTWO is categorized as Small Cap Blend Equities, while XLF is Financials Equities. VTWO tracks Russell 2000 Index, while XLF tracks Financial Select Sector Index. They also come from different issuers: Vanguard and State Street. Their fees differ too: 0.06% for VTWO and 0.08% for XLF.

Which has better risk-adjusted returns?

VTWO currently has the higher Sharpe Ratio (2.02 vs 0.42), 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.