The Energy Select Sector SPDR Fund (XLE) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and SHY is a iShares Short Government fund. So, what’s the difference between XLE and SHY? And which fund is better?
The expense ratio of XLE is 0.03 percentage points lower than SHY’s (0.12% vs. 0.15%). XLE also has a high exposure to the energy sector while SHY is mostly comprised of AAA bonds. Overall, XLE has provided higher returns than SHY over the past 11 years.
In this article, we’ll compare XLE vs. SHY. We’ll look at industry exposure and risk metrics, as well as at their fund composition and holdings. Moreover, I’ll also discuss XLE’s and SHY’s portfolio growth, performance, and annual returns and examine how these affect their overall returns.
Summary
| XLE | SHY | |
| Name | Energy Select Sector SPDR Fund | iShares 1-3 Year Treasury Bond ETF |
| Category | Equity Energy | Short Government |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 25.55B | 19.51B |
| Avg. Return | 1.28% | 1.27% |
| Div. Yield | 3.92% | 0.46% |
| Expense Ratio | 0.12% | 0.15% |
The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.
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%.
XLE’s dividend yield is 3.46% higher than that of SHY (3.92% vs. 0.46%). Also, XLE yielded on average 0.01% more per year over the past decade (1.28% vs. 1.27%). The expense ratio of XLE is 0.03 percentage points lower than SHY’s (0.12% vs. 0.15%).
Fund Composition
Holdings
| XLE Holdings | Weight |
| Exxon Mobil Corp | 23.7% |
| Chevron Corp | 20.03% |
| ConocoPhillips | 4.64% |
| EOG Resources Inc | 4.46% |
| Schlumberger Ltd | 4.43% |
| Marathon Petroleum Corp | 4.17% |
| Pioneer Natural Resources Co | 4.08% |
| Phillips 66 | 4.07% |
| Kinder Morgan Inc Class P | 3.85% |
| Williams Companies Inc | 3.5% |
XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.
Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.
| 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.
Risk Analysis
| XLE | SHY | |
| Mean Return | 0.32 | 0.09 |
| R-squared | 61.84 | 39.11 |
| Std. Deviation | 27.52 | 0.89 |
| Alpha | -11.98 | -0.03 |
| Beta | 1.54 | 0.18 |
| Sharpe Ratio | 0.12 | 0.54 |
| Treynor Ratio | -0.4 | 2.6 |
The Energy Select Sector SPDR Fund (XLE) has a Alpha of -11.98 with a Mean Return of 0.32 and a Treynor Ratio of -0.4. Its Standard Deviation is 27.52 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Beta of 1.54 and a R-squared of 61.84.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Alpha of -0.03 with a Standard Deviation of 0.89 and a Sharpe Ratio of 0.54. Its Beta is 0.18 while SHY’s R-squared is 39.11. Furthermore, the fund has a Treynor Ratio of 2.6 and a Mean Return of 0.09.
XLE’s Mean Return is 0.23 points higher than that of SHY and its R-squared is 22.73 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than SHY. The Alpha and Beta of XLE are 11.95 points lower and 1.36 points higher than SHY’s Alpha and Beta.
Performance
Annual Returns
| Year | XLE | SHY |
| 2020 | -32.56% | 3.01% |
| 2019 | 11.87% | 3.42% |
| 2018 | -18.1% | 1.45% |
| 2017 | -1.01% | 0.27% |
| 2016 | 27.95% | 0.75% |
| 2015 | -21.47% | 0.43% |
| 2014 | -8.61% | 0.48% |
| 2013 | 26.16% | 0.23% |
| 2012 | 5.17% | 0.31% |
| 2011 | 2.98% | 1.43% |
| 2010 | 21.7% | 2.23% |
XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% 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
| Fund | Initial Balance | Final Balance | CAGR |
| XLE | $10,000 | $9,339 | 1.28% |
| SHY | $10,000 | $11,486 | 1.27% |
A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
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%.
XLE’s CAGR is 0.01 percentage points higher than that of SHY and as a result, would have yielded $2,147 less on a $10,000 investment. Thus, XLE outperformed SHY by 0.01% annually.
