Financials vs Regional Banks
Live side-by-side comparison with current values, changes, and key statistics.
Why This Comparison Matters
XLF includes the large diversified banks, insurance companies, and asset managers, while KRE is concentrated in regional and community banks with higher CRE exposure and less diversification. When KRE underperforms XLF, it signals localized stress in the banking system, often related to commercial real estate, deposit flight, or net interest margin compression.
Cross-Asset Analysis
Financials (XLF) captures financial Select Sector SPDR Fund, whereas Regional Banks (KRE) reflects SPDR S&P Regional Banking ETF, credit cycle indicator, and the difference between how they move is what the ratio pair relationship is really about. Earnings growth trajectories differ between Financials (XLF) and Regional Banks (KRE) based on sector composition, and the relative path of those trajectories drives the spread over multi-quarter horizons. Sector ratios are among the most durable signals in equity markets, and Financials (XLF) versus Regional Banks (KRE) encodes a specific rotation theme that recurs across economic cycles.
Global factors, including foreign demand for US equities or sector-specific geopolitical risk, can overwhelm the domestic macro story embedded in the Financials (XLF)-Regional Banks (KRE) ratio. Cyclical exposure determines which of Financials (XLF) and Regional Banks (KRE) wins in each phase of the business cycle. Financials (XLF) benefits from conditions that hurt Regional Banks (KRE), and the ratio isolates this economic trade-off into a tradable form with known drivers.
Composition changes inside the sector indices behind Financials (XLF) and Regional Banks (KRE), such as tech-heavy reclassifications, can break historical ratio relationships mechanically. Late-cycle narratives often pull the Financials (XLF)-Regional Banks (KRE) ratio toward one extreme before reversing, a predictable pattern the best sector rotators learn to fade.
90-Day Statistics
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Frequently Asked Questions
What is the relationship between Financials (XLF) and Regional Banks (KRE)?+
Financials (XLF) and Regional Banks (KRE) are connected through sector-specific sensitivities to macro variables. When the relevant macro factor shifts, both respond, though with different sensitivities and at different speeds. The spread between Financials (XLF) and Regional Banks (KRE) captures the specific macro signal that flows through this relationship.
When does Financials (XLF) typically lead Regional Banks (KRE)?+
Financials (XLF) tends to lead Regional Banks (KRE) during macro regime shifts that favor one sector over the other. In those periods, moves in Financials (XLF) precede corresponding moves in Regional Banks (KRE) by days to weeks, depending on the transmission channel and the depth of each market.
How are Financials (XLF) and Regional Banks (KRE) historically correlated?+
Long-run correlation between Financials (XLF) and Regional Banks (KRE) varies by regime. Sector pairs show persistent rotation patterns driven by macro regime, with correlation positive on direction but wide on magnitude. The correlation is not stable: it shifts with macro conditions, and the periods when it breaks down are often the most informative moments in the Financials (XLF)-Regional Banks (KRE) relationship.
What macro conditions drive divergence between Financials (XLF) and Regional Banks (KRE)?+
Divergence between Financials (XLF) and Regional Banks (KRE) typically arises from sector composition changes, sector-specific Fed policy effects, or foreign capital flow shifts. When one asset's idiosyncratic drivers dominate, the spread moves in ways that the common macro story does not predict, which is usually a signal to look more carefully at the specific drivers at work in Financials (XLF) or Regional Banks (KRE).
Is Financials (XLF) a hedge for Regional Banks (KRE)?+
Sector pairs including Financials (XLF) and Regional Banks (KRE) are rotation trades, not hedges; both can fall together in a broad market decline. Effective hedging requires matching the hedge to the specific risk being protected, and the Financials (XLF)-Regional Banks (KRE) pair is best stress-tested under scenarios the investor most worries about before being sized into a real portfolio.
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.