Treasury Bonds vs US Real Estate (REITs) (TLT vs VNQ) 2026: Returns, Risk & Volatility

Q: Which is a better investment: TLT or VNQ?

Over the past year, VNQ looks like the better investment: it had higher total return (VNQ +13.6% vs TLT +2.6%) and a higher Sharpe ratio (VNQ 0.71 vs TLT -0.10). On risk, TLT was less volatile (TLT 10.0% vs VNQ 13.5%), TLT had a smaller max drawdown (TLT -6.7% vs VNQ -8.9%), and TLT had less severe losses on the worst 5% of days (Expected Shortfall of TLT -1.26% vs VNQ -1.97%).

Written by Gale Finance Team

Reviewed by Sid Kalla CFA Charterholder

Quick answer

Which is a better investment: TLT or VNQ?

Over the past year, VNQ outperformed TLT. VNQ returned +13.6% compared with TLT’s +2.6%. VNQ had the better risk-adjusted return, with a Sharpe ratio of 0.71 versus TLT’s -0.10. TLT was less volatile than VNQ, and TLT had a smaller max drawdown than VNQ.

Total Return

TLT +2.6%

VNQ +13.6%

Sharpe Ratio

TLT -0.10

VNQ 0.71

Annualized Volatility

TLT 10.0%

VNQ 13.5%

Max Drawdown

TLT -6.7%

VNQ -8.9%

Metric winners: Total Return: VNQ; Sharpe Ratio: VNQ; Annualized Volatility: TLT (less volatile); Max Drawdown: TLT (smaller drawdown).

TLT Total Return

↑ +2.6%

VNQ Total Return

↑ +13.6%

Relative Performance of TLT vs VNQ (Normalized to 100)

TLT VNQ

Normalized to 100 at start date for comparison

Trade TLT or VNQ

Access these assets on trusted platforms.

Hyperliquid

Trade perpetual futures exposure where supportedTLTVNQTrade on Hyperliquid

Binance

Trade futures exposure on a global exchange where supportedTLTVNQTrade on Binance

Affiliate disclosure

Key Takeaways

Total Return: TLT delivered a +2.6% total return, while VNQ returned +13.6% over the same period. VNQ outperformed on total returns.
Risk-Adjusted Return (Sharpe Ratio): TLT had a negative Sharpe (-0.10) while VNQ was positive (0.71), indicating VNQ had meaningfully better risk-adjusted performance in this period.
Volatility (Annualized): VNQ was more volatile, with 13.5% annualized volatility, versus 10.0% for TLT.
Maximum Drawdown: TLT's maximum drawdown was -6.7%, while VNQ experienced a deeper drawdown of -8.9%.
Tail Risk (VaR & Expected Shortfall): At the 5% level (daily log returns), TLT's VaR was -1.01% and its Expected Shortfall (CVaR) was -1.26%; VNQ's were -1.41% and -1.97%. VaR is the cutoff; Expected Shortfall is the average move on the worst days.
Skew & Kurtosis: Skew: TLT 0.08 vs VNQ -0.44. Excess kurtosis: TLT 0.08 vs VNQ 0.96. Negative skew leans downside; higher excess kurtosis means fatter tails.
Tail Days & Extremes: 2σ tail days (down/up): TLT 6/9, VNQ 8/4. Worst day: TLT -1.90% (2026-03-20) vs VNQ -3.10% (2026-03-20). Best day: TLT +1.69% (2025-07-29) vs VNQ +1.94% (2025-08-22).
Risk ratios: Sortino - TLT: -0.15 vs. VNQ: 1.00 , Calmar - TLT: 0.39 vs. VNQ: 1.54 , Sterling - TLT: No 10% drawdown vs. VNQ: No 10% drawdown , Treynor - TLT: -0.08 vs. VNQ: 0.19 , Ulcer Index - TLT: 3.04% vs. VNQ: 2.77%

Investment Comparison

If you invested $10,000 in each asset on May 14, 2025:

TLT $10,261.03 +2.6%

VNQ $11,357.04 +13.6%

Difference: $1,096.01 (VNQ ahead)

Treasury Bonds vs US Real Estate (REITs) Performance Over Time

Metric	TLT	VNQ
30 Days	-1.7%	4%
90 Days	-3.5%	3.6%
180 Days	-4.2%	9.1%
1 Year	2.6%	13.6%

Shorter time frames can show different leaders as market conditions change. Consider your investment horizon when comparing performance.

Treasury Bonds vs US Real Estate (REITs) Correlation

Average Correlation

moderately correlated

0.35

Current (30-day) 0.51

30-day rolling range -0.15 to +0.67

Treasury Bonds and US Real Estate (REITs) are moderately correlated over the past year. With a correlation of 0.35, these assets show moderate co-movement, offering some diversification when held together.

For portfolio construction, this moderate correlation offers some diversification benefit, though the assets still tend to move together during major market moves.

Metric	Value
Current (30-day)	0.51
Average (full period)	0.35
Minimum (30-day rolling)	-0.15
Maximum (30-day rolling)	0.67

Correlation measures how closely two assets move together. Values near +1 indicate strong co-movement, near 0 indicates independence, and negative values indicate inverse movement. Current, minimum, and maximum figures are 30-day rolling correlations on shared daily returns.

Drawdown

Maximum Drawdown

TLT

-6.7%

VNQ

-8.9%

Treasury Bonds experienced its maximum drawdown of -6.7% from 2025-10-22 to 2026-05-04. It has not yet recovered to its previous peak.

US Real Estate (REITs) experienced its maximum drawdown of -8.9% from 2026-02-17 to 2026-03-27. It took 21 days to recover.

Smaller drawdowns and faster recoveries indicate lower downside risk and greater resilience during market stress.

Treasury Bonds vs US Real Estate (REITs) Volatility (TLT vs VNQ)

TLT Volatility

10.0%

±0.63% 1-day vol

VNQ Volatility

13.5%

±0.85% 1-day vol

1-day volatility (1σ)

TLT

±0.63%

VNQ

±0.85%

Treasury Bonds's 10.0% annualized volatility translates to about ±0.63% one-standard-deviation daily volatility.

US Real Estate (REITs)'s 13.5% annualized volatility translates to about ±0.85% one-standard-deviation daily volatility.

VNQ had the wider volatility profile over this window. That means its day-to-day return distribution was broader; TLT was calmer, but lower volatility does not by itself mean better returns.

Treat the ± daily figure as a one-standard-deviation estimate from historical returns, not a forecast or expected absolute daily move. For context, 15-18% annualized volatility is roughly ±1% one-standard-deviation daily volatility.

Risk-adjusted ratios

Sharpe Ratio of TLT and VNQ

Sharpe Ratio: TLT vs. VNQ

Return per total volatility

Sharpe gives us excess return per unit of risk. Upside and downside volatility both count as risk.

Higher is better

excess return / total volatility

Formula

\displaystyle \mathrm{Sharpe} = \frac{\mathbb{E}[R] - R_f}{\sigma_R}

Sharpe ratio measures return per unit of risk (volatility). A higher Sharpe indicates better risk-adjusted performance. TLT had a negative Sharpe (-0.10) while VNQ was positive (0.71), indicating VNQ had meaningfully better risk-adjusted performance in this period.

A Sharpe above 1.0 is generally considered good, above 2.0 is excellent. Negative Sharpe means the asset underperformed the risk-free rate. Calculated on each asset's full 365-day lookback of available prices and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).

Sortino Ratio of TLT and VNQ

Sortino Ratio: TLT vs. VNQ

Return per downside volatility

Sortino keeps the return-over-risk idea, but only returns below the target rate count as volatility.

Higher is better

excess return / downside volatility

Formula

\displaystyle \mathrm{Sortino} = \frac{\mathbb{E}[R] - R_f}{\sigma_{\mathrm{down}}}

Sortino ratio measures return per unit of downside risk. Unlike Sharpe, it only counts downside deviation (returns below the target return). VNQ had better downside-adjusted returns.

A higher Sortino is better. It's useful when upside volatility is common (crypto is the obvious example). Downside deviation: TLT 7.0% vs VNQ 9.6%. Calculated on each asset's full 365-day lookback of available prices, using the daily risk-free rate as the target return, and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).

Calmar Ratio of TLT and VNQ

Calmar Ratio: TLT vs. VNQ

CAGR per worst drawdown

Calmar compares CAGR against the single deepest peak-to-trough loss over the period.

Higher is better

CAGR / max drawdown

Formula

\displaystyle \mathrm{Calmar} = \frac{\mathrm{CAGR}}{|\mathrm{MaxDD}|}

Calmar ratio compares CAGR to maximum drawdown. Higher Calmar means more return per unit of worst drawdown. VNQ posted the higher Calmar ratio.

Calmar is computed on each asset's full 365-day lookback and uses the max drawdown over that same window.

Sterling Ratio of TLT and VNQ

Sterling Ratio: TLT vs. VNQ

Return per average drawdown

Sterling smooths the drawdown penalty by using average drawdown events instead of only the worst one.

Higher is better

excess annual return / average deep drawdown

Formula

\displaystyle \mathrm{Sterling} = \frac{\mathrm{CAGR} - R_f}{\overline{D}_{>10\%}}

Sterling ratio measures excess return per unit of average drawdown (typically drawdowns worse than 10%). TLT and VNQ had no 10% drawdown in this lookback, so Sterling is not calculated.

Sterling uses average drawdown events deeper than 10% and subtracts the risk-free rate to report excess return.

Treynor Ratio of TLT and VNQ

Treynor Ratio: TLT vs. VNQ

Excess return per market beta

Treynor divides excess annualized return by beta — the sensitivity of the asset to broad-market moves. The slope shown is each asset’s beta vs SPY.

Higher is better

excess return / market beta

Formula

\displaystyle \mathrm{Treynor} = \frac{\mathbb{E}[R] - R_f}{\beta}

Treynor ratio measures excess return per unit of market risk (beta) instead of total volatility. VNQ posted the higher Treynor ratio.

Treynor uses beta vs the S&P 500 (SPY) on shared dates and the average 3-month Treasury rate as the risk-free rate.

Ulcer Index of TLT and VNQ

Ulcer Index: TLT vs. VNQ

Drawdown pain

Ulcer Index is a risk index, not a return-over-risk ratio. Lower means smaller and shorter drawdowns.

Lower is better

root-mean-square drawdown

Formula

\displaystyle \mathrm{UI} = \sqrt{\mathbb{E}[D_t^2]}

Ulcer Index captures drawdown depth and duration. Lower Ulcer Index means less drawdown pain. VNQ had the lower Ulcer Index (less drawdown pain).

Ulcer Index is computed from each asset's drawdown series over the full lookback window.

Tail Risk & Distribution Shape (1-Year): Treasury Bonds vs. US Real Estate (REITs)

This section looks at the shape of daily returns, not just the average. Tail stats are computed per asset on its own daily series (crypto includes weekends). We use daily log returns $\ln\left(\frac{P_t}{P_{t-1}}\right)$ so multi-day moves add cleanly.

Definitions: Value at Risk (VaR), Expected Shortfall, skew, kurtosis, and fat tails.

Tail Risk & Distribution Shape: TLT vs. VNQ (1-Year)

Actual daily return tails

The bars are real daily log-return observations from the article window. Darker bars are observations at or beyond each asset’s 5% VaR cutoff.

Observed returns

VaR marks the 5th percentile loss cutoff; Expected Shortfall averages the observations beyond that cutoff.

Formula

\displaystyle \mathrm{VaR}_{5\%}=Q_{0.05}(r_t),\quad \mathrm{ES}_{5\%}=\mathbb{E}[r_t\mid r_t\le \mathrm{VaR}_{5\%}]

Metric (1-Year)	TLT	VNQ
5% VaR (daily log return)	-1.01%	-1.41%
5% Expected Shortfall (CVaR)	-1.26% (worst 13 days)	-1.97% (worst 13 days)
Skew	0.08	-0.44
Excess kurtosis	0.08	0.96
2σ tail days (down / up)	6 / 9	8 / 4
Worst day	-1.90% (2026-03-20)	-3.10% (2026-03-20)
Best day	+1.69% (2025-07-29)	+1.94% (2025-08-22)

Downside co-moves (2σ) — 1-Year

Computed on shared dates only (n=249). A “2σ downside move” means a shared-close log return more than 2 standard deviations below that asset’s own mean on this shared-date series. Dates below show simple returns (%) for readability.

Downside co-move map: TLT vs. VNQ (2σ)

Shared-close daily returns

Dots mark actual downside days: asset-colored dots are one-sided downside moves, and red dots are joint downside days. Grey dots add sampled shared-return context when available. The shaded lower-left zone shows where both TLT and VNQ crossed their own 2σ downside threshold.

2σ

Show downside tail dates

Dates below are shared-date observations. The “Date” is the period end (close). Tail thresholds are computed on log returns, but the table shows simple returns (%) for readability. Returns are computed from the previous shared close to this one (for example, Friday → Monday includes weekend moves).

Days when both TLT and VNQ had a big down day (2σ)

Date (interval)	TLT	VNQ
2025-05-21	-1.71%	-2.66%
2026-01-16 → 2026-01-20	-1.31%	-1.86%
2026-03-20	-1.90%	-3.10%

Days when TLT had a big down day

Date (interval)	TLT	VNQ
2025-05-21	-1.71%	-2.66%
2025-06-06	-1.27%	+0.48%
2025-07-11	-1.38%	+0.01%
2026-01-16 → 2026-01-20	-1.31%	-1.86%
2026-03-11	-1.29%	-1.04%
2026-03-20	-1.90%	-3.10%

Days when VNQ had a big down day

Date (interval)	TLT	VNQ
2025-05-21	-1.71%	-2.66%
2025-06-25	+0.13%	-2.41%
2025-08-29 → 2025-09-02	-0.74%	-1.66%
2025-10-28	+0.26%	-1.96%
2025-10-29	-1.01%	-2.58%
2026-01-16 → 2026-01-20	-1.31%	-1.86%
2026-03-20	-1.90%	-3.10%
2026-04-21	-0.55%	-1.77%

Read this as “how ugly the ugly days get”, not as a precise forecast. One-year samples are small, so tail estimates are inherently noisy.

Full Comparison of Treasury Bonds vs. US Real Estate (REITs) (1-Year)

Metric	TLT	VNQ
Total Return	+2.6%	+13.6%
Annualized Volatility	10.0%	13.5%
Sharpe Ratio	-0.10	0.71
Sortino Ratio	-0.15	1.00
Calmar Ratio	0.39	1.54
Sterling Ratio	No 10% drawdown	No 10% drawdown
Treynor Ratio	-0.08	0.19
Ulcer Index	3.04%	2.77%
Max Drawdown	-6.7%	-8.9%
Avg Correlation to S&P 500	0.05	0.38
5% VaR (daily log return)	-1.01%	-1.41%
5% Expected Shortfall (CVaR)	-1.26%	-1.97%
Skew	0.08	-0.44
Excess kurtosis	0.08	0.96
2σ tail days (down / up)	6 / 9	8 / 4

Audit this calculation

Formulas, inputs, and conventions used to compute the metrics on this page.

Inputs & conventions

Shared window for pair metrics: 2025-05-14 → 2026-05-12 (last shared close).
Rolling correlation sample (shared closes): 220 rolling 30-day values (from 249 shared daily returns).
Annualization (days/year): TLT: 252 days/year; VNQ: 252 days/year.
Risk-free rate: Uses the 3-month U.S. Treasury yield (FRED: DGS3MO), averaged over each asset’s window:

TLT: 4.15% over 2025-05-14 → 2026-05-12.

VNQ: 4.15% over 2025-05-14 → 2026-05-12.
Volatility drag (rule of thumb): Estimated from annualized volatility (simple returns). For the log-return framing, see Log returns.

TLT: ≈ -0.5%/yr

VNQ: ≈ -0.9%/yr
Data alignment: No forward fill. Correlation and tail co-moves are computed on shared closes only.
For cross-calendar pairs (e.g., crypto vs stocks), weekend/holiday moves roll into the next shared close.
Return conventions: Volatility/Sharpe/Sortino use simple daily returns. Tail-risk uses daily log returns for distribution stats (but tables show simple returns). Log returns.

Formulas

Daily simple return

r_t = \frac{P_t}{P_{t-1}} - 1

Volatility

\sigma_{ann} = \sigma(r_t)\sqrt{A}

Volatility drag (approx.)

\text{drag} \approx \tfrac{1}{2}\sigma_{ann}^2

Sharpe Ratio

S = \frac{A\,\bar{r} - r_f}{\sigma(r_t)\sqrt{A}}

Sortino Ratio

So = \frac{A\,\bar{r} - r_f}{\sqrt{\mathbb{E}[\min(0,\,r_t - r_f/A)^2]}\,\sqrt{A}}

Maximum Drawdown

MDD = \min_t\left(\frac{P_t}{\max_{s \le t} P_s} - 1\right)

Average Correlation

\rho = \frac{\operatorname{cov}(r^A,\,r^B)}{\sigma_A\,\sigma_B}

Log returns

\ell_t = \ln\left(\frac{P_t}{P_{t-1}}\right)

Notation

$P_t$: Price on day t.
$r_t$: Simple daily return.
$\ell_t$: Log daily return.
$\bar{r}$: Average daily return.
$\sigma(r_t)$: Standard deviation of daily returns.
$A$: Annualization factor (days/year).
$r_f$: Annual risk-free rate.

Treasury Bonds vs US Real Estate (REITs): Frequently Asked Questions

Which has higher volatility: TLT or VNQ?

VNQ showed higher volatility at 13.5% annualized, compared to 10.0% for TLT Over the past year. Higher volatility means larger price swings in both directions.

Does TLT provide diversification when held with VNQ?

TLT and VNQ are moderately correlated over the past year, with an average correlation of 0.35. This offers some diversification benefit, though they still tend to move together during major market moves.

How bad are the worst 5% days for TLT vs VNQ?

Over the past year, TLT's 5% VaR was -1.01% and its 5% Expected Shortfall was -1.26% (worst 13 days). VNQ's were -1.41% and -1.97% (worst 13 days).

Do TLT and VNQ crash together on bad days?

On shared dates (n=249), when VNQ has a 2σ down day, TLT also does 37.5% (3/8 days). In the other direction, when TLT has one, VNQ also does 50.0% (3/6 days).

Which has better risk-adjusted returns: TLT or VNQ?

TLT had a negative Sharpe (-0.10) while VNQ was positive (0.71) Over the past year, indicating VNQ had meaningfully better risk-adjusted performance.

Can TLT and VNQ be combined in a portfolio?

Yes, though allocation sizing matters. Their moderate correlation offers some diversification benefits. VNQ's higher volatility (13.5%) means even small allocations can materially impact overall portfolio risk.

Explore our financial glossary

Which is a better investment: TLT or VNQ?

Share This Comparison of TLT vs VNQ

Relative Performance of TLT vs VNQ (Normalized to 100)

Trade TLT or VNQ

Key Takeaways

Investment Comparison

Treasury Bonds vs US Real Estate (REITs) Performance Over Time

Treasury Bonds vs US Real Estate (REITs) Correlation

Drawdown

Treasury Bonds vs US Real Estate (REITs) Volatility (TLT vs VNQ)

Risk-adjusted ratios

Sharpe Ratio of TLT and VNQ

Sharpe Ratio: TLT vs. VNQ

Sortino Ratio of TLT and VNQ

Sortino Ratio: TLT vs. VNQ

Calmar Ratio of TLT and VNQ

Calmar Ratio: TLT vs. VNQ

Sterling Ratio of TLT and VNQ

Sterling Ratio: TLT vs. VNQ

Treynor Ratio of TLT and VNQ

Treynor Ratio: TLT vs. VNQ

Ulcer Index of TLT and VNQ

Ulcer Index: TLT vs. VNQ

Tail Risk & Distribution Shape (1-Year): Treasury Bonds vs. US Real Estate (REITs)

Tail Risk & Distribution Shape: TLT vs. VNQ (1-Year)

Downside co-moves (2σ) — 1-Year

Downside co-move map: TLT vs. VNQ (2σ)

Days when both TLT and VNQ had a big down day (2σ)

Days when TLT had a big down day

Days when VNQ had a big down day

Full Comparison of Treasury Bonds vs. US Real Estate (REITs) (1-Year)

Inputs & conventions

Formulas

Treasury Bonds vs US Real Estate (REITs): Frequently Asked Questions

Which has higher volatility: TLT or VNQ?

Does TLT provide diversification when held with VNQ?

How bad are the worst 5% days for TLT vs VNQ?

Do TLT and VNQ crash together on bad days?

Which has better risk-adjusted returns: TLT or VNQ?

Can TLT and VNQ be combined in a portfolio?