The Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between XLY and HYG? And which fund is better?
The expense ratio of XLY is 0.36 percentage points lower than HYG’s (0.12% vs. 0.48%). XLY also has a high exposure to the consumer cyclical sector while HYG is mostly comprised of BB bonds. Overall, XLY has provided higher returns than HYG over the past 11 years.
In this article, we’ll compare XLY vs. HYG. We’ll look at industry exposure and annual returns, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss XLY’s and HYG’s portfolio growth, performance, and holdings and examine how these affect their overall returns.
|Name||Consumer Discretionary Select Sector SPDR Fund||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Consumer Cyclical||High Yield Bond|
|Issuer||SPDR State Street Global Advisors||iShares|
The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.
XLY’s dividend yield is 3.81% lower than that of HYG (0.63% vs. 4.44%). Also, XLY yielded on average 12.45% more per year over the past decade (18.86% vs. 6.42%). The expense ratio of XLY is 0.36 percentage points lower than HYG’s (0.12% vs. 0.48%).
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|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
|HYG Bond Sectors||Weight|
HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Standard Deviation of 15.97 with a R-squared of 80.84 and a Sharpe Ratio of 1.06. Its Beta is 1.02 while XLY’s Mean Return is 1.47. Furthermore, the fund has a Alpha of 6.96 and a Treynor Ratio of 16.69.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Mean Return of 0.46 with a Treynor Ratio of 10.01 and a Beta of 0.48. Its Standard Deviation is 6.96 while HYG’s R-squared is 4.1. Furthermore, the fund has a Alpha of 3.58 and a Sharpe Ratio of 0.7.
XLY’s Mean Return is 1.01 points higher than that of HYG and its R-squared is 76.74 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than HYG. The Alpha and Beta of XLY are 3.38 points higher and 0.54 points higher than HYG’s Alpha and Beta.
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XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% respectively.
The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLY would have resulted in a final balance of $63,066. This is a profit of $53,066 over 11 years and amounts to a compound annual growth rate (CAGR) of 18.86%.
With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.
XLY’s CAGR is 12.45 percentage points higher than that of HYG and as a result, would have yielded $43,639 more on a $10,000 investment. Thus, XLY outperformed HYG by 12.45% annually.
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