Relative Strength: Compare Stocks with the Market

A stock can be relatively strong and still lose money. If it falls 5 percent while the market falls 10 percent, it did better than the market. Relative strength measures exactly that: a stock’s performance compared with a benchmark, not its gain or loss on its own.

This guide explains the calculation behind every relative strength line. It shows the difference between the simple price ratio, an indexed comparison, the Mansfield version and the IBD RS Rating, and it builds a five-step watchlist process. Two real Dow examples from the same selection date show what happened next, once with strength that held and once with strength that faded. This article follows our editorial policy and is for education, not investment advice.

Relative strength in 30 seconds

• A ratio, not an oscillator. Relative strength = price of the stock ÷ price of the benchmark. A rising line means the stock is doing better than the market, whatever its own direction.
• Not the RSI. The RSI compares a market only with its own past moves. Relative strength compares two markets.
• Start date and benchmark decide the result. In our example, Merck ranked first among the Dow stocks over six months, but sixth over three or twelve months.
• A filter, not a buy signal. Relative strength helps you choose what to watch. The entry, the stop and the position size still come from the chart and your risk plan.

What is relative strength?

Relative strength is the price of a stock divided by the price of a benchmark, tracked over time. Fidelity describes the same calculation as Relative Strength Comparison: one security’s price divided by a base security’s price (Fidelity, read on 25 October 2026). The benchmark is usually a broad index or an index ETF such as SPY.

The direction of the line matters, not its level. A rising ratio means the stock performed better than the benchmark over that stretch. A flat ratio means both moved by the same percentage. A falling ratio means the stock lagged, even if its price went up. The ratio says nothing about whether you made money.

Four versions of relative strength

Several tools carry the name relative strength, and they are not the same number. Mixing up the price ratio, the Mansfield version and a published rating is a common source of confusion.

• Price ratio: stock price ÷ benchmark price. Its direction shows outperformance; the level itself has no meaning.
• Indexed comparison: the ratio set to 100 on a start date, 100 × (ratio today ÷ ratio at start). A value of 105 means the ratio has risen 5 percent since the start; the change itself is 100 × (ratio today ÷ ratio at start − 1).
• Mansfield relative strength: one common form, on weekly bars, is 100 × (ratio ÷ its 52-week simple moving average − 1). It shows whether the ratio is above or below its own longer average.
• IBD RS Rating: a rank from 1 to 99 of a stock’s 52-week price performance against all stocks, published by Investor’s Business Daily.

The IBD RS Rating is a proprietary ranking, not a line you can calculate yourself. Investor’s Business Daily describes it as a score from 1 to 99 based on a stock’s price performance over the last 52 weeks compared with all other stocks, and warns not to confuse it with the RS line against the S&P 500 (IBD, read on 25 October 2026). A ratio or ranking you build yourself is not the IBD rating.

The Mansfield version is a ratio measured against its own average. It is part of Stan Weinstein’s approach, explained in our guide to stage analysis. Mark Minervini’s Trend Template uses relative strength as one criterion among several; our Mark Minervini profile describes it. This guide covers the common base: the ratio itself.

A worked example: strong while losing money

The table shows why relative strength and profit are two different questions. All numbers are invented for the arithmetic, and the benchmark stands for any index.

	Case 1	Case 2
Stock	100 → 95 (−5%)	100 → 120 (+20%)
Benchmark	100 → 90 (−10%)	100 → 130 (+30%)
Ratio change	0.95 ÷ 0.90 − 1 = +5.56%	1.20 ÷ 1.30 − 1 = −7.69%
Return difference	+5 points	−10 points

In Case 1, the stock lost money and still gained relative strength. In Case 2, it made 20 percent and lost relative strength. Note that the ratio change (+5.56 percent) is not the same as the difference between the two returns (5 percentage points). Use one of the two consistently.

Never rank stocks by the raw level of the ratio. A $500 stock divided by SPY at 650 gives 0.77; a $50 stock gives 0.077. That says nothing about which one did better. Compare the change of each ratio over the same period, or index all of them to 100 on the same start date.

Benchmark and time window: choose before you look

The benchmark should match the question you are asking. For a US stock against the whole market, the S&P 500 or SPY is the usual choice. To see whether a stock leads its own industry, compare it with a sector ETF or a sector index such as the SOX for chip stocks. Stock and benchmark need the same currency, the same trading days and the same price basis: either both with dividends (total return) or both without.

The start date can change the answer completely. On 31 March 2026, Merck had the best six-month relative strength of the 30 Dow stocks in our test. Measured over three months or twelve months to the same day, it ranked sixth. Decide the window before you look at the results, and keep it the same for every stock you compare.

A watchlist in five steps

Relative strength works best as one filter in a short, written process. Here is a version you can apply on a weekly or monthly schedule.

1. Universe. Start with liquid stocks you can actually trade, for example an index such as the Dow or the S&P 500. A stock screener or a heatmap helps with the first overview.
2. Trend. Keep only stocks in an uptrend by a rule you can check, for example a close above the 200-day average.
3. Relative strength. Rank the rest by the change of their ratio against the benchmark over a fixed window, and keep the top few.
4. Chart structure. Look for a base, a pullback or a breakout level on the chart. A strong ratio without a clear entry point is a stock to watch, not to buy.
5. Risk plan. Define the stop before the entry and size the position from it, as shown in our guide to position sizing.

Two Dow examples from the same selection date

We fixed the selection rule before we downloaded a single price. The universe was the 30 Dow stocks as of 31 March 2026 (Alphabet replaced Verizon only on 29 June 2026, according to S&P Dow Jones Indices). The benchmark was SPY. We ranked the stocks by the change of their ratio over the 126 trading days to 31 March 2026, kept those above their 200-day average and took the top three.

Stock	Ratio, 6 months before	Ratio after	Price after
MRK	+56.2%	+3.0%	+20.8%
CAT	+53.3%	−2.4%	+14.4%
JNJ	+37.4%	−7.6%	+8.3%
SPY			+17.3%

MRK = Merck, CAT = Caterpillar, JNJ = Johnson & Johnson. “Before” = change of the ratio to SPY from 29 September 2025 to the selection date 31 March 2026; “after” = 31 March to 30 September 2026. Daily closes from Yahoo Finance, split-adjusted, without dividends (price series, not total return). Own calculation.

We show the charts of the best and the worst of the three follow-ups, and we say so. Three stocks from one date are an illustration, not a test. Dividends are left out for both stock and benchmark, so the figures are price returns, and the universe is a single index on a single day.

Merck: ahead at the end, after a deep setback

Merck’s relative strength held over six months, but not in a straight line. From the selection date, the ratio against SPY fell by about 19 percent to its low on 11 May 2026, then recovered and ended 3.0 percent higher. Merck’s price rose 20.8 percent, ahead of SPY’s 17.3 percent. Strength that holds over six months can still include weeks of clear weakness.

Johnson & Johnson: a rising price, fading relative strength

Johnson & Johnson made money after the selection date and still failed the relative strength test. The price rose 8.3 percent to 30 September 2026. SPY rose 17.3 percent in the same time, so the ratio fell 7.6 percent, with a low about 22 percent below its March level in early June. JNJ underperformed SPY over the follow-up period, so it was no market leader in those six months; for a holder, it was still a gain.

How to show relative strength on a chart

The quickest way is a ratio chart of the two symbols. In TradingView, you can type a division into the symbol search, for example MRK/SPY, and the chart shows the ratio as one line (TradingView help on spread charts, read on 25 October 2026). The help page notes that spread charts can repaint, because real-time bars are built from ticks and historical bars from minute data.

A percentage comparison shows the same story in a different form. Indexing both lines to 100 on one date, as in the upper panels of our charts, shows how far each one has moved since then. The ratio below shows the difference directly. Both depend on the start date, so write it on the chart.

Limits of relative strength

Relative strength describes the past; it does not forecast the future. Strong stocks can stay strong, as Merck did in our example, or fade, as Johnson & Johnson did. A leader can also fall hard when the whole market turns, because a ratio measures only the difference to the benchmark.

Check whether your chart includes dividends. Price returns leave them out; including dividends for both the stock and the benchmark (total return) can change their relative performance in either direction. Survivorship is a second trap: a list of today’s index members already leaves out the companies that dropped out, so always fix the universe on the selection date.

Relative strength: my conclusion

Relative strength answers one question well: is this stock doing better than the market? It does not answer whether the stock will rise, where to enter or how much to risk. Use it as a filter to keep your watchlist short, and use the chart and your stop for the trade.

Write down the benchmark, the window and the date before you look. Our two examples came from the same rule and the same day, and they ended in opposite ways. That is normal, and it is why position size and a risk plan matter more than the ranking itself.

Frequently asked questions about relative strength

What is the difference between relative strength and RSI?

Relative strength compares a stock with a benchmark; the RSI compares a market only with its own recent gains and losses. The RSI is an oscillator between 0 and 100. Relative strength is a ratio of two prices, and its level has no fixed range. The RSI guide linked above explains the oscillator.

Can a stock have relative strength in a falling market?

Yes, if it falls less than the benchmark. A stock down 5 percent while the market is down 10 percent has a rising ratio. It still lost money, so relative strength in a falling market is a sign of resilience, not a reason to expect a gain.

How do you calculate relative strength?

Divide the stock’s closing price by the benchmark’s closing price on each day. To compare several stocks, set each ratio to 100 on the same start date: 100 × (ratio today ÷ ratio at start). Use the same trading days, currency and price basis for both, and keep the window the same for every stock.

Where can I find the relative strength of a stock?

You can build it yourself in most charting tools as a ratio chart, for example MRK/SPY. Screeners and investment newspapers also publish their own rankings, such as the IBD RS Rating, which follows its own method. Check which version a tool shows before you compare its numbers with a ratio you calculated.