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Yes, 2 names for the same concept. RS is a comparison between 2
investments. If one is outperforming the other then its RS would be
greater. RS is measured in percent. The ratio of prices is computed
for the investment and for the broad market Index, say SP500. For
eg., use the prices today and the prices of one month ago. If the
investment made a 2% change and the SP500 made a 1% change in price
then the RS of the investment would be 2.00 or 100% as compared to
SP500. Conversely, if the SP500 made a 4% change in price the
investment would now have a RS of 0.50 or 50%. Allows one to see
which investments are strong and weak.
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, Franco Gornati <francogornati@xxxx>
wrote:
> Hi Tomasz,
>
> >This one is called "Relative PERFORMANCE" (not relative strength)
>
> Ok, two names for the same concept.
>
> For Investopedia 'Relative Strength: a measure of price trend that
> indicates how a stock is performing relative to other stocks in its
> industry. It is calculated dividing the _price performance_ of a
stock
> by the _price performance_ of an appropriate index for the same time
> period.'
>
> Dividing is a bad idea, subtracting is right. Another way to look at
> it is plotting one performance against the others, just like
Relative
> Performance Charts.
>
> Clearly one can sofisticate the concept. For example O'Neil's RS
compare
> percentage changes calculated as front-end weighted averages of 3,
5, 9
> and 12 months. Chuck Rademacher once pointed to a Columbine
Capital's
> document that futher developed the concept in order to take into
account
> of stock's alpha and beta. There are really many possibilities and
in
> fact RS seems to be one of the few tools that really works.
>
> --
> Franco
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