1. What is Relative Strength?

Relative Strength (RS) measures a stock's performance relative to a benchmark index. It indicates whether a stock is outperforming or underperforming the market.

2. How Does the Calculator Work?

The calculator uses the Relative Strength formula:

Where:

• Stock Return — The percentage return of the individual stock
• Index Return — The percentage return of the benchmark index

Interpretation:

• RS > 1 indicates the stock outperformed the index
• RS = 1 indicates performance equal to the index
• RS < 1 indicates the stock underperformed the index

3. Importance of Relative Strength

Details: Relative Strength is a key metric for investors to identify strong performers in the market. It helps in comparing stocks within the same sector or against broader market indices.

4. Using the Calculator

Tips: Enter both stock return and index return as percentages. The index return cannot be zero (division by zero is undefined).

5. Frequently Asked Questions (FAQ)

Q1: What time period should I use for returns?
A: Common periods are 3 months, 6 months, or 1 year. Use the same period for both stock and index returns.

Q2: Which index should I compare against?
A: Use a relevant benchmark - S&P 500 for large US stocks, NASDAQ for tech stocks, or sector-specific indices.

Q3: How is this different from RSI?
A: Relative Strength (RS) compares stock to index, while Relative Strength Index (RSI) is a momentum indicator based on price changes.

Q4: What's a good RS value?
A: Typically values above 1.2 are considered strong, though this varies by market conditions and sector.

Q5: Can RS be negative?
A: Yes, if either the stock or index return is negative. Interpretation depends on whether both are negative or one is negative.