Relative Strength Calculator

Investors often wonder how well a stock is performing compared to the broader market or a benchmark index. Simply looking at stock returns may not give the full picture. This is where the Relative Strength (RS) Calculator comes in handy.

Relative Strength Calculator

What is Relative Strength in Investing?

Relative strength (RS) is a simple yet powerful metric that compares the performance of one asset (such as a stock) against another (usually a benchmark index like the S&P 500, NASDAQ, or sector index).

The formula for relative strength is: Relative Strength (RS)=Stock ReturnBenchmark Return\text{Relative Strength (RS)} = \frac{\text{Stock Return}}{\text{Benchmark Return}}Relative Strength (RS)=Benchmark ReturnStock Return​

  • RS > 1 → The stock is outperforming the benchmark.
  • RS = 1 → The stock is performing equal to the benchmark.
  • RS < 1 → The stock is underperforming the benchmark.

This simple calculation helps traders spot stronger investment opportunities and avoid weak ones.

How to Use the Relative Strength Calculator

Using our online tool is straightforward. You only need two inputs:

  1. Stock Return (%) – Enter the percentage return of the stock.
  2. Benchmark Return (%) – Enter the percentage return of the benchmark index.

Then, follow these steps:

  1. Enter the stock return in the first box (e.g., 12).
  2. Enter the benchmark return in the second box (e.g., 8).
  3. Click on Calculate.
  4. Instantly, the calculator will display:
    • Relative Strength Value
    • Interpretation (Outperforming, Underperforming, or Equal to Benchmark)

You can also click Reset to start a new calculation.

Example of Relative Strength Calculation

Let’s look at a few examples to understand how it works:

Example 1: Outperforming Benchmark

  • Stock Return: 15%
  • Benchmark Return: 10%

RS=1510=1.5RS = \frac{15}{10} = 1.5RS=1015​=1.5

Interpretation: Outperforming Benchmark

Example 2: Underperforming Benchmark

  • Stock Return: 5%
  • Benchmark Return: 12%

RS=512=0.42RS = \frac{5}{12} = 0.42RS=125​=0.42

Interpretation: Underperforming Benchmark

Example 3: Equal to Benchmark

  • Stock Return: 8%
  • Benchmark Return: 8%

RS=88=1RS = \frac{8}{8} = 1RS=88​=1

Interpretation: Equal to Benchmark

Why Use the Relative Strength Calculator?

Here are the main reasons investors and traders use this tool:

  1. Quick Comparison – Instantly check if a stock is outperforming or lagging behind its index.
  2. Better Decision-Making – Helps in choosing stronger investments.
  3. Risk Management – Avoid weak stocks that consistently underperform.
  4. Trend Analysis – Track performance over time.
  5. Portfolio Optimization – Shift investments toward stronger assets.

Benefits for Traders and Investors

  • Traders can identify stocks with strong momentum.
  • Long-term investors can choose fundamentally strong companies outperforming their benchmarks.
  • Portfolio managers can monitor the relative strength of holdings versus the index.
  • Beginners can easily learn about stock vs. market performance.

20 Frequently Asked Questions (FAQs)

Q1: What is a Relative Strength Calculator?
A: It’s an online tool that compares a stock’s return to a benchmark return to measure performance.

Q2: What does RS > 1 mean?
A: It means the stock is outperforming the benchmark.

Q3: Can RS be negative?
A: Yes, if either stock or benchmark returns are negative, RS can be negative.

Q4: Is this the same as RSI (Relative Strength Index)?
A: No, RSI is a momentum indicator, while relative strength compares stock vs. benchmark returns.

Q5: Can I use this for mutual funds or ETFs?
A: Yes, you can compare any asset return against a benchmark.

Q6: What benchmark should I use?
A: Common benchmarks include S&P 500, NASDAQ, or sector-specific indices.

Q7: What does RS = 1 mean?
A: The stock is performing equally with the benchmark.

Q8: What happens if benchmark return is zero?
A: The tool will alert you because division by zero is not valid.

Q9: Can I compare two stocks with this tool?
A: Yes, treat one stock as the "benchmark" and compare.

Q10: Why is relative strength important?
A: It helps identify strong-performing assets and avoid weak ones.

Q11: How often should I check relative strength?
A: Traders may check daily, while investors may check quarterly.

Q12: Is higher RS always better?
A: Higher RS means stronger performance, but always consider fundamentals too.

Q13: Does this work in negative markets?
A: Yes, you can compare relative losses as well.

Q14: Can beginners use this tool?
A: Absolutely, it is designed to be simple and user-friendly.

Q15: Is this calculator free?
A: Yes, it is completely free to use.

Q16: What’s the difference between RS and absolute returns?
A: Absolute return shows standalone stock performance, RS compares it against the market.

Q17: Can RS help in portfolio rebalancing?
A: Yes, it helps identify which assets to hold or replace.

Q18: What is a good RS value?
A: RS > 1 is generally considered strong.

Q19: Can I use RS for short-term trading?
A: Yes, traders often use RS to spot momentum stocks.

Q20: Does RS guarantee profits?
A: No, it is a useful indicator, but not a guarantee of future results.

Conclusion

The Relative Strength Calculator is a simple but powerful tool that helps traders and investors analyze how a stock performs against its benchmark. Whether you’re a beginner or an experienced trader, this calculator can provide quick insights for making better investment decisions.