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SHY vs. EMB: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between SHY and EMB? And which fund is better?

The expense ratio of SHY is 0.24 percentage points lower than EMB’s (0.15% vs. 0.39%). SHY is mostly comprised of AAA bonds and EMB has a high exposure to BBB bond. Overall, SHY has provided lower returns than EMB over the past 11 years.

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

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Summary

SHYEMB
NameiShares 1-3 Year Treasury Bond ETFiShares J.P. Morgan USD Emerging Markets Bond ETF
CategoryShort GovernmentEmerging Markets Bond
IssueriSharesiShares
AUM19.51B19.76B
Avg. Return1.27%6.43%
Div. Yield0.46%3.85%
Expense Ratio0.15%0.39%

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%.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

SHY’s dividend yield is 3.39% lower than that of EMB (0.46% vs. 3.85%). Also, SHY yielded on average 5.16% less per year over the past decade (1.27% vs. 6.43%). The expense ratio of SHY is 0.24 percentage points lower than EMB’s (0.15% vs. 0.39%).

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Fund Composition

Holdings

SHY - Holdings

SHY Bond SectorsWeight
AAA99.67%
Others0.33%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

EMB - Holdings

EMB Bond SectorsWeight
BBB33.79%
B21.97%
BB16.92%
A13.67%
AA7.97%
Below B4.49%
Others1.11%
AAA0.09%
US Government0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

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Risk Analysis

SHYEMB
Mean Return0.090.44
R-squared39.1123.34
Std. Deviation0.898.44
Alpha-0.030.89
Beta0.181.36
Sharpe Ratio0.540.55
Treynor Ratio2.63.24

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

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Treynor Ratio of 3.24 with a Beta of 1.36 and a Standard Deviation of 8.44. Its Mean Return is 0.44 while EMB’s R-squared is 23.34. Furthermore, the fund has a Sharpe Ratio of 0.55 and a Alpha of 0.89.

SHY’s Mean Return is 0.35 points lower than that of EMB and its R-squared is 15.77 points higher. With a Standard Deviation of 0.89, SHY is slightly less volatile than EMB. The Alpha and Beta of SHY are 0.92 points lower and 1.18 points lower than EMB’s Alpha and Beta.

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Performance

Annual Returns

SHY vs. EMB - Annual Returns

YearSHYEMB
20203.01%5.48%
20193.42%15.57%
20181.45%-5.67%
20170.27%9.98%
20160.75%9.41%
20150.43%0.43%
20140.48%6.69%
20130.23%-7.42%
20120.31%17.64%
20111.43%7.2%
20102.23%11.47%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% respectively.

The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

SHY vs. EMB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SHY$10,000$11,4861.27%
EMB$10,000$19,2956.43%

A $10,000 investment in SHY would have resulted in a final balance of $11,486. This is a profit of $1,486 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.

SHY’s CAGR is 5.16 percentage points lower than that of EMB and as a result, would have yielded $7,809 less on a $10,000 investment. Thus, SHY performed worse than EMB by 5.16% annually.


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