[EquisMetaStock Group] Volatility adjusted relative strength

["Andrew Tomlinson" <andrew_tomlinson@xxxxxxxxxxx>]

I've been playing around with calculating relative strength not as C/index
but as a volatility adjusted spread. This more nearly approximates the
relative performance assuming an equal amount of risk-adjusted capital
invested in each security. So, for example, rather than a regular relative
strength vs. the S&P500 

SP:=Security("C:\MetaStock Data\Indeces\.spx",C);
RS:=C/SP;rs;

I would take the spread between the two securities adjusted for their
volatility expressed as ATR as % of price e.g.

P1:=50;
S1H:=H;
S1L:=L;
S1C:=C;
S2H:=Security("C:\MetaStock Data\Indeces\.spx",H);
S2L:=Security("C:\MetaStock Data\Indeces\.spx",L);
S2C:=Security("C:\MetaStock Data\Indeces\.spx",C);
TR1:=Max(Max(S1H-S1L,S1H-Ref(S1C,-1)),(Ref(S1C,-1)-S1L));
ATR1:=Mov(TR1,P1,S)/Mov(S1C,P1,S);
TR2:=Max(Max(S2H-S2L,S2H-Ref(S2C,-1)),(Ref(S2C,-1)-S2L));
ATR2:=Mov(TR2,P1,S)/Mov(S2c,P1,S);
Ratio:=ATR1/ATR2;
Spread:=S1C-S2C*ratio;spread;

I'm curious - has anyone else looked at this? Theoretically, this would be
an alternative to any regular relative strength calculation, and would
better reflect the reality of "am I better off investing in A or B?". I have
also seen this done using beta as the volatility measure.

Andrew




------------------------ Yahoo! Groups Sponsor --------------------~--> 
In low income neighborhoods, 84% do not own computers.
At Network for Good, help bridge the Digital Divide!
http://us.click.yahoo.com/EpW3eD/3MnJAA/cosFAA/BefplB/TM
--------------------------------------------------------------------~-> 

 
Yahoo! Groups Links

<*> To visit your group on the web, go to:
    http://groups.yahoo.com/group/equismetastock/

<*> To unsubscribe from this group, send an email to:
    equismetastock-unsubscribe@xxxxxxxxxxxxxxx

<*> Your use of Yahoo! Groups is subject to:
    http://docs.yahoo.com/info/terms/