Stock Charted
Glossary

Relative Strength

Relative strength measures how an investment's performance compares with a benchmark, such as a market index or another asset, over a chosen period, often shown as a ratio of their prices.

What Is Relative Strength?

Relative strength compares the performance of an investment with a benchmark index, another security, or a group of peers over a specific time window. Instead of asking only whether a stock went up or down, it asks whether the stock went up more, or fell less, than the comparison point. A stock can show relative strength even when it loses value, if the benchmark fell further.

How It Is Calculated

A common method divides the price of the security by the price of the benchmark. A rising ratio suggests the security is outperforming the benchmark, while a falling ratio suggests underperformance.

Relative Strength Ratio = Price of Security ÷ Price of Benchmark

Some analysts instead compare percentage returns over several periods, and some use total return, which includes dividends, for a fuller picture. Charts often plot the ratio line beneath the price so the trend is easy to see.

Why Investors Study It

Relative strength is central to momentum analysis, which is based on the idea that securities that have recently outperformed may continue to do so for a time. It is also used to rank stocks within a sector or to observe sector rotation, where money appears to shift between industries over time.

The term is sometimes confused with the relative strength index, a separate indicator that measures the size and speed of a single security's recent price changes against its own history. The names are similar, but the calculations and purposes differ.

Limitations

Relative strength describes past performance and does not guarantee future results. The conclusion depends heavily on the chosen benchmark and time period, and a short window can produce a different picture than a long one. An unsuitable benchmark can be misleading. The measure also ignores company fundamentals unless they are analyzed separately, and it does not capture volatility or the risk taken to achieve the result.

Updated October 27, 2026. For general education only; not financial, tax or legal advice.

Browse the Glossary

Related Terms

Total Return

Total return is the complete measure of an investment's performance over a period, combining price change with income such as dividends or interest and any reinvested payouts, usually expressed as a percentage.

Momentum

Momentum is the tendency of assets that have recently performed well to keep performing well for a time, and of weak performers to keep lagging, which investors may study or trade on.

Relative Strength Index (RSI)

The Relative Strength Index is a momentum oscillator that measures the speed and size of recent price changes on a scale from 0 to 100, often used to flag overbought or oversold conditions.

Volatility

Volatility is a statistical measure of how much and how quickly an asset's price moves up or down over a given period, with higher volatility indicating larger price swings.

Momentum Investing

A strategy that buys investments whose prices have risen recently and sells or avoids those that have fallen, based on the idea that recent price trends tend to persist for a time.

Moving Average (MA)

A moving average is a smoothed line showing the average price of a security over a set number of recent periods, updated as new data arrives, used to reduce short-term noise and identify trends.