XRT’s heavy tilt toward smaller firms cuts both ways: If small-caps come roaring back, a good chunk of XRT will be along for the ride.
Maybe that’s why XRT’s returns are more volatile than RTH’s since the latter’s inception almost three years ago.
ETF.com data and calcs.
Std deviation of LN return of daily TR NAV, annualized. 12/21/2012-11/12/2014
The Checkout Basket
In short, both funds will do well if UBS is right about the effects on retailers of a stronger dollar.
RTH captures the big retail names we all know, and in weights proportional to their market footprint. It also has decent assets and liquidity. XRT is unquestionably the trader’s choice, but leans hard toward smaller retailers, which makes it riskier.
At the time this article was written, the author held no positions in the securities mentioned. Contact Paul Britt at [email protected].