MDY vs. SHY: What’s The Difference?

The SPDR S&P MIDCAP 400 ETF Trust (MDY) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between MDY and SHY? And which fund is better?

The expense ratio of MDY is 0.08 percentage points higher than SHY’s (0.23% vs. 0.15%). MDY also has a high exposure to the industrials sector while SHY is mostly comprised of AAA bonds. Overall, MDY has provided higher returns than SHY over the past 11 years.

In this article, we’ll compare MDY vs. SHY. We’ll look at holdings and annual returns, as well as at their industry exposure and performance. Moreover, I’ll also discuss MDY’s and SHY’s risk metrics, fund composition, and portfolio growth and examine how these affect their overall returns.

Summary

MDY SHY
Name SPDR S&P MIDCAP 400 ETF Trust iShares 1-3 Year Treasury Bond ETF
Category Mid-Cap Blend Short Government
Issuer SPDR State Street Global Advisors iShares
AUM 21.31B 19.51B
Avg. Return 13.29% 1.27%
Div. Yield 0.94% 0.46%
Expense Ratio 0.23% 0.15%

The SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

MDY’s dividend yield is 0.48% higher than that of SHY (0.94% vs. 0.46%). Also, MDY yielded on average 12.01% more per year over the past decade (13.29% vs. 1.27%). The expense ratio of MDY is 0.08 percentage points higher than SHY’s (0.23% vs. 0.15%).

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Fund Composition

Holdings

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

MDY SHY
Mean Return 1.08 0.09
R-squared 86.66 39.11
Std. Deviation 16.83 0.89
Alpha -4.1 -0.03
Beta 1.15 0.18
Sharpe Ratio 0.73 0.54
Treynor Ratio 9.97 2.6

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Sharpe Ratio of 0.73 with a Alpha of -4.1 and a Treynor Ratio of 9.97. Its Mean Return is 1.08 while MDY’s Beta is 1.15. Furthermore, the fund has a R-squared of 86.66 and a Standard Deviation of 16.83.

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Beta of 0.18 with a Treynor Ratio of 2.6 and a Standard Deviation of 0.89. Its R-squared is 39.11 while SHY’s Sharpe Ratio is 0.54. Furthermore, the fund has a Mean Return of 0.09 and a Alpha of -0.03.

MDY’s Mean Return is 0.99 points higher than that of SHY and its R-squared is 47.55 points higher. With a Standard Deviation of 16.83, MDY is slightly more volatile than SHY. The Alpha and Beta of MDY are 4.07 points lower and 0.97 points higher than SHY’s Alpha and Beta.

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Performance

Annual Returns

MDY vs. SHY - Annual Returns

Year MDY SHY
2020 13.51% 3.01%
2019 25.86% 3.42%
2018 -11.28% 1.45%
2017 15.89% 0.27%
2016 20.33% 0.75%
2015 -2.4% 0.43%
2014 9.42% 0.48%
2013 33.08% 0.23%
2012 17.58% 0.31%
2011 -1.99% 1.43%
2010 26.17% 2.23%

MDY had its best year in 2013 with an annual return of 33.08%. MDY’s worst year over the past decade yielded -11.28% and occurred in 2018. In most years the SPDR S&P MIDCAP 400 ETF Trust provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 13.51%, 15.89%, and 17.58% respectively.

The year 2019 was the strongest year for SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

MDY vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MDY $10,000 $36,524 13.29%
SHY $10,000 $11,486 1.27%

A $10,000 investment in MDY would have resulted in a final balance of $36,524. This is a profit of $26,524 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.29%.

With a $10,000 investment in SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

MDY’s CAGR is 12.01 percentage points higher than that of SHY and as a result, would have yielded $25,038 more on a $10,000 investment. Thus, MDY outperformed SHY by 12.01% annually.


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