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XLY vs. XLC: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between XLY and XLC? And which fund is better?

XLY and XLC have the same expense ratio: 0.12%. XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided lower returns than XLC over the past 2 years.

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

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Summary

XLYXLC
NameConsumer Discretionary Select Sector SPDR FundCommunication Services Select Sector SPDR Fund
CategoryConsumer CyclicalCommunications
IssuerSPDR State Street Global AdvisorsSPDR State Street Global Advisors
AUM20.21B14.09B
Avg. Return18.86%29.04%
Div. Yield0.63%0.62%
Expense Ratio0.12%0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

XLY’s dividend yield is 0.01% higher than that of XLC (0.63% vs. 0.62%). Also, XLY yielded on average 10.17% less per year over the past decade (18.86% vs. 29.04%). XLY and XLC have the same expense ratio: 0.12%.

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Fund Composition

Industry Exposure

XLY vs. XLC - Industry Exposure

XLYXLC
Technology0.57%0.0%
Industrials0.0%0.0%
Energy0.0%0.0%
Communication Services0.0%100.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive5.34%0.0%
Real Estate0.0%0.0%
Financial Services0.0%0.0%
Consumer Cyclical94.1%0.0%
Basic Materials0.0%0.0%

The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLY is 94.10% more exposed to the Consumer Cyclical sector than XLC (94.1% vs 0.0%). XLY’s exposure to Consumer Defensive and Technology stocks is 5.34% higher and 0.57% higher respectively (5.34% vs. 0.0% and 0.57% vs. 0.0%). In total, Financial Services, Real Estate, and Healthcare also make up 0.00% less of the fund’s holdings compared to XLC (0.00% vs. 0.00%).

Holdings

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

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%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

XLYXLC
Mean Return1.470
R-squared80.840
Std. Deviation15.970
Alpha6.960
Beta1.020
Sharpe Ratio1.060
Treynor Ratio16.690

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Standard Deviation of 15.97 with a Treynor Ratio of 16.69 and a R-squared of 80.84. Its Mean Return is 1.47 while XLY’s Alpha is 6.96. Furthermore, the fund has a Sharpe Ratio of 1.06 and a Beta of 1.02.

The Communication Services Select Sector SPDR Fund (XLC) has a Sharpe Ratio of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Alpha is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

XLY’s Mean Return is 1.47 points higher than that of XLC and its R-squared is 80.84 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than XLC. The Alpha and Beta of XLY are 6.96 points higher and 1.02 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. XLC - Annual Returns

YearXLYXLC
202029.66%26.85%
201928.43%31.22%
20181.66%0.0%
201722.77%0.0%
20165.87%0.0%
20159.93%0.0%
20149.49%0.0%
201342.74%0.0%
201223.6%0.0%
20115.98%0.0%
201027.36%0.0%

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 XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

XLY vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLY$10,000$16,65218.86%
XLC$10,000$16,64529.04%

A $10,000 investment in XLY would have resulted in a final balance of $16,652. This is a profit of $6,652 over 2 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

XLY’s CAGR is 10.17 percentage points lower than that of XLC and as a result, would have yielded $7 more on a $10,000 investment. Thus, XLY performed worse than XLC by 10.17% annually.


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