Relative strength

Definition:

Movement of a stock price over the past year as compared to a market index (like the S&P 500). A value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the one-year period. Equation for Relative Strength: [current stock price/year-ago stock price] divided by [current S&P 500/year-ago S&P 500]. Note: this can be a misleading indicator of performance because it does not take risk into account.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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