XAR vs ITA ETF Comparison 2026: Equal-Weight vs Cap-Weight Defense ETFs: AI Score, Valuation, Performance and Upside
XAR and ITA are both US aerospace and defense ETFs but with critically different portfolio constructions. XAR's equal-weight methodology diversifies across 30+ defense companies — preventing Boeing or Raytheon from dominating. ITA's cap-weight concentrates in Raytheon, Lockheed, Boeing, Northrop — the traditional defense primes. For investors concerned about Boeing concentration risk, XAR is preferable. For investors wanting pure defense prime contractor exposure, ITA's cap-weight delivers it.
XAR vs ITA — SPDR Aerospace & Defense ETF (equal-weight defense ETF spreading exposure across 30+ companies to avoid Boeing/Raytheon concentration) versus iShares US Aerospace & Defense ETF (cap-weight defense ETF concentrating in the largest US defense prime contractors — RTX, LMT, BA, NOC, GD — the primary beneficiaries of Pentagon budget increases).
ITA holds the edge across 4 of 5 key metrics in this comparison. ITA has delivered stronger 1-year price return (-0.26% vs -6.87% for XAR).
- want to avoid Boeing stock concentration risk in a defense ETF — XAR's equal-weight dilutes Boeing's manufacturing challenges and program overruns across 30+ holdings
- believe smaller defense contractors in electronics, drones, space, and cybersecurity offer better growth potential than large legacy prime contractors
- prefer more balanced exposure across the full defense sector spectrum rather than concentration in the 5 largest primes that dominate ITA
- are comfortable with more frequent equal-weight rebalancing transaction costs and higher exposure to smaller defense contractors with less predictable government contract flows
- want pure large-cap defense prime contractor concentration — Raytheon, Lockheed Martin, General Dynamics, Northrop Grumman as the primary beneficiaries of F-35, hypersonics, and missile defense program spending
- believe defense budget increases under geopolitical stress (Russia-Ukraine, China) primarily flow to large integrated defense primes with existing Pentagon relationships
- prefer cap-weight simplicity and lower rebalancing costs vs XAR's equal-weight approach — ITA's portfolio naturally concentrates in proven large defense contractors
- are comfortable with Boeing concentration risk within ITA and aware that Boeing underperformance can materially impact ITA returns
| Metric | XAR | ITA |
|---|---|---|
| ETF scorei | 27.0 | 26.9 |
| Latest closei | $231.09 | $214.68 |
| 1M returni | -0.86% | +3.32% |
| 3M returni | -15.50% | -12.66% |
| 6M returni | -9.22% | +0.35% |
| 1Y returni | -6.87% | -0.26% |
The ETF score weights long-term returns and risk-adjusted performance most heavily, but still rewards low expense ratios, larger fund size, and broader diversification — so it can favor low-cost, broad, mega-cap funds over smaller thematic or actively-managed funds even when the latter have delivered stronger returns.
How much would $10,000 be worth today if invested at the start of each period, with all dividends reinvested?
| Period | XAR | ITA |
|---|---|---|
| 1Y ago | $9.36K (-6.4%) started 2025-11-03 | $10.04K (+0.4%) started 2025-11-03 |
| 5Y ago | $20.05K (+100.5%) started 2021-11-03 | $22.05K (+120.5%) started 2021-11-03 |
| 10Y ago | $47.07K (+370.7%) started 2016-11-03 | $41.14K (+311.4%) started 2016-11-03 |
Hypothetical — past performance does not guarantee future results.
| Metric | XAR | ITA |
|---|---|---|
| Expense ratioi | 0.35% | 0.37% |
| Total assets (AUM)i | $5.54B | $12.14B |
| Dividend yieldi | 0.18% | 0.27% |
| Trailing P/Ei | 31.52 | 33.26 |
| Betai | 1.08 | 0.78 |
| 52-week change | -6.87% | -0.26% |
| Metric | XAR | ITA |
|---|---|---|
| 1Y returni | -6.87% | -0.26% |
| 6M returni | -9.22% | +0.35% |
| 3M returni | -15.50% | -12.66% |
| 1M returni | -0.86% | +3.32% |
| 1Y Sharpe ratio | -0.23 | -0.07 |
| Betai | 1.08 | 0.78 |
| Dividend yieldi | 0.18% | 0.27% |
| 5Y CAGR | +14.35% | +16.20% |
Over the past year, XAR and ITA have moved strongly in the same direction (correlation of 0.92), based on daily returns.
Lower drawdown and smaller single-period drops generally indicate a smoother ride, though they do not guarantee lower future risk.
| Period | Metric | XAR | ITA |
|---|---|---|---|
| 1Y | Growthi | -6.55% | +0.11% |
| CAGRi | -6.57% | +0.11% | |
| Volatilityi | 29.71% | 23.40% | |
| Sharpe ratioi | -0.23 | -0.07 | |
| Sortino ratioi | -0.34 | -0.10 | |
| Max drawdowni | 26.56% | 20.04% | |
| Current drawdowni | 22.08% | 15.12% | |
| Avg drawdowni | 8.91% | 7.43% | |
| Ulcer Indexi | 11.13% | 9.28% | |
| Max daily dropi | 5.08% | 3.78% | |
| Max wkly dropi | 9.92% | 7.09% | |
| 5Y | Growthi | +95.47% | +111.78% |
| CAGRi | +14.35% | +16.20% | |
| Volatilityi | 24.23% | 20.47% | |
| Sharpe ratioi | 0.49 | 0.62 | |
| Sortino ratioi | 0.72 | 0.90 | |
| Max drawdowni | 27.55% | 20.04% | |
| Current drawdowni | 22.08% | 15.12% | |
| Avg drawdowni | 7.12% | 4.52% | |
| Ulcer Indexi | 9.49% | 6.41% | |
| Max daily dropi | 7.65% | 8.44% | |
| Max wkly dropi | 12.63% | 11.69% | |
| 10Y | Growthi | +336.20% | +271.08% |
| CAGRi | +15.88% | +14.02% | |
| Volatilityi | 25.09% | 23.43% | |
| Sharpe ratioi | 0.54 | 0.49 | |
| Sortino ratioi | 0.76 | 0.69 | |
| Max drawdowni | 46.37% | 51.00% | |
| Current drawdowni | 22.08% | 15.12% | |
| Avg drawdowni | 8.44% | 7.44% | |
| Ulcer Indexi | 12.17% | 11.63% | |
| Max daily dropi | 13.31% | 14.74% | |
| Max wkly dropi | 24.16% | 25.96% |
| Category | XAR | ITA |
|---|---|---|
| Fund name | State Street SPDR S&P Aerospace & Defense ETF | iShares U.S. Aerospace & Defense ETF |
| Type | ETF | ETF |
| Expense ratioi | 0.35% | 0.37% |
| Total assets (AUM)i | $5.54B | $12.14B |
| Dividend yieldi | 0.18% | 0.27% |
- Equal-weighting eliminates Boeing concentration risk: XAR's equal-weight methodology prevents Boeing's manufacturing difficulties and program overruns from dominating the ETF's performance — avoiding single-stock concentration risk
- Broader defense ecosystem exposure: XAR's equal-weight approach gives meaningfully more weight to smaller defense electronics, drone, and cybersecurity companies than cap-weight alternatives
- Full defense spectrum coverage: XAR includes prime contractors, space companies, defense electronics, and aerospace manufacturers equally — a comprehensive defense sector ETF
- Defense prime contractor concentration: ITA's market cap weighting emphasizes the largest US defense primes — RTX, LMT, GD, NOC are primary beneficiaries of Pentagon budget increases and major weapons programs
- Cap-weight alignment with defense budget spending: large defense primes capture most Pentagon program dollars — ITA's concentration reflects where actual government defense spending flows
- Lower rebalancing costs than XAR: cap-weight indices rebalance less frequently — lower transaction costs maintaining the index vs XAR's equal-weight rebalancing drag
- Smaller company underperformance risk: equal-weighting includes smaller defense companies that may not have the government contract scale of Lockheed Martin or Raytheon — smaller contractors have higher execution risk
- More frequent rebalancing costs: equal-weight indices require rebalancing as stocks move — creating more frequent transaction costs vs cap-weight alternatives like ITA
- 0.35% expense ratio: both XAR and ITA are expensive sector ETFs — investors should weigh the cost vs simply holding individual large defense contractors
- Boeing concentration risk: ITA holds Boeing as a top holding — Boeing's production challenges (737 MAX, manufacturing quality issues) can significantly drag ITA performance when Boeing underperforms
- Large-cap concentration misses smaller defense innovators: ITA's cap-weight underweights drone, cybersecurity, and emerging defense technology companies that could outperform traditional primes
- 0.40% expense ratio: slightly more expensive than XAR's 0.35% — both are expensive sector ETFs
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