What is Relative Strength (RS)?
Relative Strength (RS) is a fundamental metric used by investors and traders to compare the performance of a stock against a benchmark index like the S&P 500, Nasdaq, or any other market index. The formula is simple: RS = Stock Return / Benchmark Return. An RS value greater than 1 indicates the stock outperformed the benchmark, while a value less than 1 indicates underperformance. This metric is essential for momentum investing strategies and helps identify market leaders.
How to Use This Relative Strength Calculator
- 1
Enter stock prices
Input the starting and ending prices for the stock you want to analyze. Use prices from the same time period (e.g., start of year to today, or any specific date range).
- 2
Enter benchmark prices
Input the starting and ending prices for your benchmark index (e.g., S&P 500, Nasdaq, Russell 2000) for the exact same time period.
- 3
Calculate and interpret
Click "Calculate RS" to see the Relative Strength ratio along with individual returns and an interpretation of the result. RS above 1 = outperformance, below 1 = underperformance.
Why Use Our Relative Strength Calculator?
Momentum Investing
Identify stocks with strong relative performance for momentum-based strategies. Outperformers tend to continue outperforming.
Stock Selection
Filter stocks by relative strength to focus on market leaders and avoid laggards in your portfolio.
Performance Analysis
Compare your holdings against the market to understand whether your picks are adding value.
Understanding Relative Strength Values
| RS Value | Interpretation |
|---|---|
| RS > 1.2 | Strong outperformance - stock significantly beat the market |
| RS = 1.0 - 1.2 | Outperformance - stock beat the market |
| RS = 1.0 | Market performance - stock matched the benchmark |
| RS = 0.8 - 1.0 | Slight underperformance - stock lagged slightly |
| RS < 0.8 | Underperformance - stock significantly lagged the market |
Relative Strength Calculator FAQ
- What is Relative Strength (RS)?
- Relative Strength (RS) compares the performance of a stock to a benchmark index (like the S&P 500). It is calculated as RS = Stock Return / Benchmark Return. An RS above 1 means the stock outperformed the benchmark; below 1 means underperformance.
- How is Relative Strength different from RSI?
- Relative Strength (RS) compares a stock to a benchmark index, while the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements within the same stock. They are different indicators with different purposes.
- What does an RS of 1.5 mean?
- An RS of 1.5 means the stock returned 50% more than the benchmark. For example, if the benchmark returned 10%, the stock returned 15%. This indicates strong outperformance.
- How do I calculate stock and benchmark returns?
- Return is calculated as (Ending Price - Starting Price) / Starting Price × 100. Use the same time period for both the stock and benchmark. For example, if a stock went from $100 to $120, the return is (120-100)/100 = 20%.
- Why is Relative Strength important for stock selection?
- Relative Strength helps identify stocks that are outperforming the market. Momentum investors often seek stocks with high RS, as outperformance tends to persist. It helps filter strong stocks from weak ones for portfolio construction.