Relative Strength (vs Index)
How a stock or sector is performing compared to a benchmark index like the S&P 500. Outperforming the index = positive relative strength.
Relative strength in the equity context compares a stock's price performance to a benchmark — typically the S&P 500. If AAPL is up 15% and the S&P 500 is up 8% over the same period, AAPL has strong relative strength.
Relative strength is a leadership indicator. Stocks showing RS before the broad market bottoms tend to lead the next rally. Stocks that lag during a bull market or fall more than the index during a correction are showing relative weakness — a warning.
Do not confuse this with the RSI (Relative Strength Index), which is a momentum oscillator based only on the stock's own price history. RS here always involves a comparison to an external benchmark.
On the desk
The S&P 500 is down 10% year-to-date. Stock A is down 3% and Stock B is down 20%. Stock A has strong relative strength — likely an institutional favorite they are defending. Stock B has poor relative strength — likely being distributed. In a market recovery, Stock A is more likely to lead.