VTWO vs. XLY

Last updated Jun 16, 2026

VTWO (Vanguard Russell 2000 ETF) and XLY (Consumer Discretionary Select Sector SPDR Fund) are both exchange-traded funds - VTWO is a Small Cap Blend Equities fund tracking the Russell 2000 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, VTWO returned 11.54%/yr vs 12.92%/yr for XLY. A 0.77 correlation means they provide meaningful diversification when combined. VTWO charges 0.06%/yr vs 0.13%/yr for XLY.

Performance

VTWO vs. XLY - Performance Comparison

The chart below illustrates the hypothetical performance of a $10,000 investment in Vanguard Russell 2000 ETF (VTWO) 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, VTWO achieves a 20.23% return, which is significantly higher than XLY's -0.50% return. Over the past 10 years, VTWO has underperformed XLY with an annualized return of 11.54%, while XLY has yielded a comparatively higher 12.92% annualized return.

VTWO

• 1D: 0.81%
• 1M: 6.35%
• YTD: 20.23%
• 6M: 17.96%
• 1Y: 43.20%
• 3Y*: 18.23%
• 5Y*: 6.57%
• 10Y*: 11.54%

XLY

• 1D: 1.69%
• 1M: 1.75%
• YTD: -0.50%
• 6M: -2.21%
• 1Y: 12.88%
• 3Y*: 13.46%
• 5Y*: 7.45%
• 10Y*: 12.92%

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

VTWO vs. XLY - Yearly Performance Comparison

	2026 (YTD)	2025	2024	2023	2022	2021	2020	2019	2018	2017
VTWO Vanguard Russell 2000 ETF	20.23%	12.90%	11.55%	17.08%	-20.49%	14.79%	20.22%	25.81%	-11.15%	14.69%
XLY Consumer Discretionary Select Sector SPDR Fund	-0.50%	7.37%	26.51%	39.64%	-36.27%	27.93%	29.63%	28.39%	1.58%	22.82%

Correlation

The correlation between VTWO and XLY is 0.67, 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	0.67
Correlation (3Y) Calculated over the trailing 3-year period	0.69
Correlation (5Y) Calculated over the trailing 5-year period	0.75
Correlation (10Y) Calculated over the trailing 10-year period	0.75
Correlation (All Time) Calculated using the full available price history since Sep 22, 2010	0.77

The correlation between VTWO and XLY has been stable across timeframes, ranging from 0.67 to 0.77 - a consistent structural relationship.

VTWO vs. XLY - Sectors Allocation Comparison

Sectors	VTWO	XLY
Industrials	17.7%	0.1%
Technology	17.0%	0.9%
Healthcare	16.5%	-
Financial Services	15.7%	-
Consumer Cyclical	8.4%	97.5%
Real Estate	6.1%	-
Energy	6.1%	-
Basic Materials	4.8%	-
Utilities	2.9%	-
Communication Services	2.4%	1.4%
Consumer Defensive	2.4%	-

Return for Risk

VTWO vs. XLY — Risk / Return Rank

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

VTWO

VTWO Risk / Return Rank: 77
VTWO Sharpe Ratio Rank: 78
VTWO Sortino Ratio Rank: 75
VTWO Omega Ratio Rank: 68
VTWO Calmar Ratio Rank: 82
VTWO Martin Ratio Rank: 80

XLY

XLY Risk / Return Rank: 22
XLY Sharpe Ratio Rank: 22
XLY Sortino Ratio Rank: 22
XLY Omega Ratio Rank: 21
XLY Calmar Ratio Rank: 21
XLY Martin Ratio Rank: 23

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. XLY - Risk-Adjusted Trends Comparison

This table presents a comparison of risk-adjusted performance metrics for Vanguard Russell 2000 ETF (VTWO) 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.

	VTWO	XLY	Difference
Sharpe ratio: Return per unit of total volatility	2.22	0.71	+1.51
Sortino ratio: Return per unit of downside risk	3.01	1.10	+1.91
Omega ratio: Gain probability vs. loss probability	1.36	1.13	+0.23
Calmar ratio: Return relative to maximum drawdown	3.95	0.86	+3.09
Martin ratio: Return relative to average drawdown	14.00	2.64	+11.36

VTWO vs. XLY - Sharpe Ratio Comparison

The current VTWO Sharpe Ratio is 2.22, which is higher than the XLY Sharpe Ratio of 0.71. The chart below compares the historical Sharpe Ratios of VTWO 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

VTWO vs. XLY - Drawdown Comparison

The maximum VTWO drawdown since its inception was -41.19%, smaller than the maximum XLY drawdown of -59.05%. Use the drawdown chart below to compare losses from any high point for VTWO and XLY.

Drawdown Indicators

	VTWO	XLY	Difference
Max Drawdown Largest peak-to-trough decline	-41.19%	-59.05%	+17.86%
Max Drawdown (1Y) Largest decline over 1 year	-10.99%	-14.98%	+3.99%
Max Drawdown (3Y) Largest decline over 3 years	-27.57%	-26.01%	-1.56%
Max Drawdown (5Y) Largest decline over 5 years	-31.88%	-39.67%	+7.79%
Max Drawdown (10Y) Largest decline over 10 years	-41.19%	-39.67%	-1.52%
Current Drawdown Current decline from peak	0.00%	-4.59%	+4.59%
Average Drawdown Average peak-to-trough decline	-8.37%	-9.55%	+1.18%
Ulcer Index Depth and duration of drawdowns from previous peaks	3.09%	4.88%	-1.79%

Volatility

VTWO vs. XLY - Volatility Comparison

Vanguard Russell 2000 ETF (VTWO) has a higher volatility of 7.16% compared to Consumer Discretionary Select Sector SPDR Fund (XLY) at 6.44%. This indicates that VTWO's price experiences larger fluctuations and is considered to be riskier than XLY based on this measure. The chart below showcases a comparison of their rolling one-month volatility.

Volatility by Period

	VTWO	XLY	Difference
Volatility (1M) Calculated over the trailing 1-month period	7.16%	6.44%	+0.72%
Volatility (6M) Calculated over the trailing 6-month period	14.24%	13.54%	+0.70%
Volatility (1Y) Calculated over the trailing 1-year period	19.61%	18.35%	+1.26%
Volatility (5Y) Calculated over the trailing 5-year period, annualized	22.58%	23.85%	-1.27%
Volatility (10Y) Calculated over the trailing 10-year period, annualized	23.14%	22.09%	+1.05%

VTWO vs. XLY - Expense Ratio Comparison

VTWO has a 0.06% expense ratio, which is lower than XLY's 0.13% 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. XLY - Dividend Comparison

VTWO's dividend yield for the trailing twelve months is around 1.05%, more than XLY's 0.75% yield.

Position	TTM	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
VTWO Vanguard Russell 2000 ETF	1.05%	1.25%	1.21%	1.45%	1.48%	1.13%	0.92%	1.36%	1.41%	1.18%	1.27%	1.23%
XLY Consumer Discretionary Select Sector SPDR Fund	0.75%	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 VTWO and XLY in my portfolio?

VTWO and XLY have a correlation of 0.67, 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 XLY?

VTWO has higher volatility (7.16%) compared to XLY (6.44%). In terms of maximum drawdown, VTWO dropped -41.19% vs XLY's -59.05%.

Which ETF is better, VTWO or XLY?

On 10-year performance, XLY leads with 12.92% vs 11.54% for VTWO. On fees, VTWO is cheaper at 0.06% per year. On volatility, XLY has been the lower-risk option at 6.44%. The better choice depends on whether you care most about return, fees, risk, or income.

Which ETF has performed better, VTWO or XLY?

Over the 10-year period, XLY has performed better with a 12.92% return vs 11.54%. Past performance does not guarantee future results, so compare this with risk, fees, and fund exposure.

Which ETF is cheaper, VTWO or XLY?

VTWO is cheaper with a 0.06% expense ratio, compared with 0.13% for XLY.

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

VTWO has the higher dividend yield at 1.05%, compared with 0.75% for XLY.

What is the main difference between VTWO and XLY?

VTWO is categorized as Small Cap Blend Equities, while XLY is Consumer Discretionary Equities. VTWO tracks Russell 2000 Index, while XLY tracks Consumer Discretionary Select Sector Index. They also come from different issuers: Vanguard and State Street. Their fees differ too: 0.06% for VTWO and 0.13% for XLY.

Which has better risk-adjusted returns?

VTWO currently has the higher Sharpe Ratio (2.22 vs 0.71), 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.