“A big reason for the divergence is the ETF’s extra exposure to those retail companies, which collectively were up over 30 percent in the past year. In addition, XHB weights all of its holdings equally so that small- and mid-cap companies, which have been doing better than large-cap stocks since 2012, have a louder voice than they do in ITB, which is market-cap weighted,” according to Balchunas.

ITB and XHB do share some traits in common. For example, neither fund, despite impressive performances over the past 24 months, are anywhere close to their pre-crisis highs. Additionally, both ETFs have been outperformed by the oft-overlooked PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB) to start 2014. [Overlooked Homebuilders ETF Ready to Rally]

SPDR S&P Homebuilders ETF


ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of XHB.