How to use the relative strength calculator
- Paste the stock’s closing prices, oldest first. Monthly closes work well for a two-year view; daily or weekly closes work for shorter periods. Use adjusted closes when the stock paid dividends or split, so the comparison reflects total return rather than price alone.
- Paste the benchmark’s prices for the same dates. For a US large-cap stock this is usually the S&P 500 index or an ETF that tracks it. The two lists must have the same number of values.
- Choose what each price represents: a month, week, trading day or quarter. This only sets the labels in the look-back table and the annualized figure.
The results show the relative performance over the whole period, the return difference in percentage points, the two returns, the latest value of the ratio line and how far it sits below its high. The chart draws the ratio line with both series rebased to 100, and the table breaks the result down over the last 1, 3, 6 and 12 periods where there is enough data.
How relative strength is calculated
Relative performance = (1 + Rstock) ÷ (1 + Rbench) − 1
Return difference = Rstock − Rbench (percentage points)St and Bt are the stock price and the benchmark level at time t; S0 and B0 are the first values. R is the total return over the period.
The ratio line and the relative performance are the same idea: the ratio line ends at 100 × (1 + relative performance). The look-back rows apply the same formula starting 1, 3, 6 or 12 periods before the latest price.
A worked example
The example holds 25 month-end closes for a growth stock and for the S&P 500: two years of monthly returns. The stock rose from $52.00 to $67.93, a return of +30.63%. The index rose +17.48%.
The return difference is +13.16 pp, and the relative outperformance is +11.20%: the ratio line ended at 111.2. Annualized, the stock beat the index by +5.45% a year.
The look-back table tells a more nuanced story. Over the last 12 months the stock was ahead by +18.68%, but its relative performance was -7.72% over the last 6 months and -4.15% over the last 3. The ratio line peaked at 120.9 and has moved -8.02% since that high. The stock is still ahead over two years, but its lead has been shrinking.
Percentage points or relative performance?
Both numbers appear because they answer different questions, and they diverge more as returns get larger.
| Case | Stock | Benchmark | Difference | Relative performance |
|---|---|---|---|---|
| Example (24 months) | +30.63% | +17.48% | +13.16 pp | +11.20% |
| Stock doubles | +100.00% | +50.00% | +50.00 pp | +33.33% |
| Both fall | -20.00% | -25.00% | +5.00 pp | +6.67% |
The difference in percentage points is easy to quote and is what most performance reports show. Relative performance is what the ratio line measures: how much more money you would have from $1 in the stock than from $1 in the benchmark. It is the right figure when you chain periods together, because relative performances compound and percentage-point differences do not.
Relative strength is not RSI
The names cause constant confusion. The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator. It looks only at the stock itself, compares the size of its recent up moves with its recent down moves (usually over 14 periods) and scales the result between 0 and 100. Readings above 70 or below 30 are often described as overbought or oversold.
Relative strength against a benchmark, sometimes called comparative relative strength, uses two securities. It has no upper or lower bound and says nothing about overbought or oversold conditions. A stock can have an RSI of 80 while lagging the market, if the whole market is rallying even harder. This calculator measures the comparative kind only.
How investors use the ratio line
- Momentum screening. Many momentum approaches rank stocks by their relative performance over the past 6 or 12 months, sometimes skipping the latest month. A stock with a strong 12-month figure but weak recent rows, as in the example, sits on the border between leader and fading leader.
- Judging a holding. If you own a stock instead of an index fund, the ratio line shows whether that choice has paid off. A line that keeps falling means the index would have been the better holding over that period.
- Reading direction rather than level. A ratio line can be far above 100 because of a strong year long ago and still be falling today. The look-back table and the distance from the high make that visible.
- Relative strength in falling markets. A rising ratio line during a market decline means the stock is losing less. That can signal resilience, but it is still a loss.
What this calculator does not include
- Risk. Beating the index with a much more volatile stock is not the same as beating it on a risk-adjusted basis. The alpha calculator and beta calculator adjust for market risk.
- Dividends, unless you include them. Price-only data understates the return of high-yield stocks. Use adjusted closes for both series, or a total-return version of the index.
- Forecasting power. Past relative strength is a description, not a prediction. Momentum effects have been widely studied, but they are inconsistent and can reverse sharply.
- Date alignment. The calculator assumes both lists cover identical dates. A missing month in one list shifts every later comparison.